The SMB funding sector has been seriously heating up in the last few years. However, many ambitious business owners often have the opposite problem — they have the ideas, but the capital is the problem.
You’re probably asking, how to resolve fund issues?
As we all know, traditional SMB funding took a hard punch during the financial crisis in 2008, with banks preferring for bigger, more secure and stable investments over SMB ventures. Most SMB owners know a lot about the challenges of getting financing for their companies or financing for a new product. It can be very hard and there’s no short and easy road to funding, in most of the cases, but I hope that these 20 SMB funding resources can help.
Banks can help you only if you have a stable business, strong credit, and finances, or collateral. Traditional banks can be a great starting point and can help you investigate your real position in terms of funding. But don’t worry, even if your company doesn’t have a strong track record and sufficient assets as collateral to get a loan, talking to some employee of a traditional bank can help you find out what documents you need and to pick the best option possible for you.
- Small Business Administration (SBA)
If your business doesn’t fit the strict lending criteria of the traditional banks, the U.S. Small Business Administration maybe can help you. They offer lenders ( in most cases banks) and federal guarantee on your loan. That way, SBA make it less risky for lenders to lend you the money you need to make your business strong and prosperous. By doing that, the SBA also connects you with agreeable rates that traditional lenders can offer to you.
Also, unlike most loans by bank, you can ask SBA for financial help even if you want to start your business. But, the application process isn’t easy, you can easily get trapped under a stack of documents while you’re working on the appropriate forms. An online lender like SmartBiz can provide a more up-to-date application process, issuing SBA loans much faster than traditional banks.
Click here to find more information about SBA.
- Credit unions
In case you like a personal touch and have an existing membership, credit unions may be the good choice for you.
Like banks, they can offer you encouraging rates and loans backed by the SBA. But unlike banks, they have increased their SMB lending since 2008.
If you are a member, the co-op nature of credit unions generally ties them to the community, and that can help you get the benefits of name recognition and more personal relationships.
According to The Oxford Dictionaries , crowdfunding is “the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.”
The whole deal with crowdfunding is that is to use everyone you know to help fund your business through small investments. Usually, these small investments come with some bonus, whether it is a piece of product or some kind of ownership in the company.
Here are few crowdfunding sites you should consider investigate more
Kickstarter – Their mission is “to help bring creative projects to life”
GoFundMe – “Fundraising site for personal causes and life-events”
Indiegogo – “A way for people all over the world to join forces to make ideas happen”
Street Shares– “A new kind of business loan. Fast. Fair. Affordable.”
- Online alternative lenders
If you need cash fast, have bad personal credit, or just don’t want to wait for a bank to approve you a loan, online alternative lenders can help you. Since traditional banks limit access to capital, online alternative lenders have increased in popularity.
Online alternative lenders are especially useful for owners which are in constant struggle with the need for fast cash or bad credit, there are various online lenders that can turn around funding within 24 hrs.
However,you need to know that the cost of borrowing is way higher than other solutions. So, some online alternative lenders charge annual percentage rates over 100%.
However, these alternative lenders can be the good option if the bank says no to you.
For more information abut online alternative lenders, click here.
- Peer-to-Peer lending (P2P)
Peer-to-Peer lending is a method of debt financing that permits individuals to borrow money – without using intermediaries such as official financial institutions. It usually removes the middleman from the whole process, but it also demands more effort, time, and risk in comparison with the general brick-and-mortar lending scenarios, for example.
Here are some of the most popular P2P Lenders you can investigate:
- Merchant Cash Advance
Merchant Cash Advance works this way: Your company sells a part of its future credit card sales to a Merchant Cash Advance provider and in exchange, you get a sum of working capital. So, your company tells its credit card processor to automatically forward a fixed percentage of its credit card earnings directly to the provider once they are settled.
Here are some Merchant Cash Advance starting points:
- Private Loan Guarantees
If your company is in early stage and the bank is ignoring your appeals, you can find an investor to guarantee your loan.
- Community Development Financial Institution (CDFI)
Community Development Financial Institutions (CDFIs) belongs to private-sector. Their primary mission is to financial intermediaries with community development. They usually attract capital from both public and private sources. CDFIs helps economically afflicted communities by providing capital and financial services, and credits that are generally unavailable from mainstream financial institutions.
Click here and find out more about CDFI.
- Offices of Economic Development
The government cares and constantly works to make and promote job opportunities.
The basic principle of the government is that they can help people to create an environment that boosts innovation, awards risk-taking and endorse equal opportunity range from job priorities, investing in public infrastructures to developing affordable housing.
- Business Line of Credit
A business line of credit can be a true asset to your company because it will help you meet the short-term working capital needs such as covering cash flow shortages or buying increased seasonal inventory or unpredicted operating expenses.
Find out more about Business Line of Credit.
- Asset Based Lending/Financing
Your SMB can manipulate with your inventory in order to secure working capital.
Your line of credit, or loan, which can be secured by inventory because it provides structured working capital so term loans (which are secured by inventory, accounts receivable, equipment and/or real estate, machinery. This type of financing can be the best way for you to start up your business, refinance loans and manage buy-ins/outs.
According to The Oxford Dictionaries , Asset Based Lending/Financing is: “the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.”
For more information about this funding model, click here.
Bartering is the act of exchanging of goods or selling and services without using the money. It enables those SMBs with the lack of monetary currency to still collect goods and receive services.
Here you can find 36 bartering websites.
- Vendor Credit
Vendor Credit is a loan from one company to another that is usually used for buying goods from the company that provides that loan. The vendor can increase sales, earns interest, and sometimes even acquire an interest in the customer.
More information about Vendor Credit.
Customers or Vendors is a person or an organization, which receives and/or sells goods and services from/ to another party and has the capacity to choose between different businesses and products.
Factoring represents a financing method in which a company owner sells accounts receivable at a discount to a third-party funding source in order to boost capital.
- Purchase Order Financing
Here are the steps to purchase order financing :
- get a purchase order from customer;
- find a reliable supplier for the products;
- place the order with that supplier.
It can be a great solution if cash flow reserves of your SMB are low. Purchasing order financing can frees up cash for the critical business cost. Another benefit from Purchasing order financing is that it doesn’t show up as debt for the company. Besides using that extra cash to get discounts on purchases, it also allows your SMB to get approved for more financing.
King Trade Capital is the largest purchase order finance company in the United States.
- PayPal Working Capital
PayPal Working Capital let SMBs pay their loan back as they get paid.
- Equity Financing
Equity financing represents the act of boosting money for company activities simply by selling general or preferred stock to institutional investors or individual. So, in return for the paid money, shareholders receive ownership interests in the company.
If you want to find out how it works, click here.
- Equity Crowdfunding
Equity Crowdfunding is a hybrid way of funding, which combines crowdfunding and equity financing. It can be classified as a relatively new way of funding since it was opened to the public in May of 2016. Even if you’re not accredited investors, you can fund your SMB in exchange for equity in the company.
Most SMB owners are familiar with the challenges of getting funding for a new product or financing for their business. As you already know, there’s no short, easy way of funding, in most cases, but I hope these SMB funding resources can help.