The need for business lending is at an all-time high, a contra to the hard economic times that have led to a high unemployment rate, contributing largely by and by to the springing up of new businesses.The catch, however, is that while small-business lending is rising, many entrepreneurs remain ineligible for bank loans as financial institutions find it too much of a risk. So what alternatives to bank loans are out there?
1.Crowdfunding
Crowdfunding has evolved majorly due to the cropping up of online platforms such as Kickstarter, go fund me and IndieGoGo. Entrepreneurs provide rewards for example merchandise, early access to products and/or services to lenders instead of cash repayments of the funds. One of the pros of crowdfunding? well, you get funding from people who have researched on your product or service enough, to believe in it and want to nurture it from a personal perspective.
2.Crowdlending
Peer to peer lending does have some similarities to crowdfunding, yet it is different in its own right. Unlike crowdfunding, crowdlending brings investors (the crowd) together with borrowers and allows the investors (or lenders) to lend small sums of money directly to hundreds or thousands or borrowers, with the investors being repaid for their investment. In case of a default, measures and activities are also taken to recover the principal and interest payments
3.Factoring
Factoring involves selling accounts receivable eg invoices to a third party, mostly at a discounted price. The 3rd party then assumes the risk on the invoices and provides a quick cash injection to the business, which on most occasions is usually partial with the remaining balance being paid as soon as the full invoice value is collected.
Factoring is an easy option especially when you need a quick cash injection to re-invest or make asset acquisitions for the business. That and the peace of mind allows you to focus on growing the business.
ALSO READ: Â ALTERNATIVES TO STARTING A BUSINESS
So if you are not a fan of bank loans and/or are just looking for a quick cash injection without the lengthy and often very misleading conversations with banks, a quick research on the three might give you the answer you are looking for, and if that doesn’t do it for you, you could always get a couple of friends pitch in. Just remember to put in on paper. Paper trumps rock. Always remember that.