4 Alternative Ways to Finance Your Business

Whenever I browse through the latest finance news for small business, I get confused. Why? One minute, I read about how banks are easing up on lending for business owners and the next minute, I come upon a post which says the opposite. What's the real score? Are small businesses really getting the help we deserve or because of the recession, is bank financing really not feasible right now?
As far as I could tell, it is what it is. Some business owners are given the chance to grow or start their business with bank loans and some aren't as lucky. For the latter, there are still ways to finance your business. Unconventional? Maybe. But the important thing is, there is help out there. We just need to be aware of it.

  1. Factoring - There are two types of factoring: spot and full-service. The idea is businesses sell their outstanding accounts receivables to a commercial finance company. These companies then are the ones responsible to collect and manage the receivables. The receivables are sold for less than its actual worth (your company would only receive about 70-80%) and the rest would be the profit of the finance company you will be selling your receivables to.
  2. Accounts Receivables Financing - This is just like a bank loan. You would not be selling your accounts receivable. Instead you will be submitting to a commercial finance company the documentations of your businesses' account receivables and it would serve as the collateral for your loan. The invoices you would be submitting would determine how much is the loanable amount.
  3. Asset-Based Lending - The security for this type of loan is your business assets such as equipments, real estate and inventory. You would be the one to collect all the accounts receivables but you have to submit a report (of your receivables) to the financial company you will be taking a loan from.
  4. Credit Cards - Small business credit cards can also be a big help to those entrepreneurs who need cash and even to buy equipments needed for the business. There are some arguments on the risks of using credit cards to finance the business such as the unpredictability of interest rates so you need to monitor interest rates and avoid default on payments so that you wouldn't incur excess charges.   

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