“Not only will they provide the funds, [but] they will usually guide you and assist you along the way,” said Wilbert Wynnberg, an entrepreneur and speaker based in Singapore. “Remember, there is no point in borrowing money just to lose it later. “
With invoice financing, also known as factoring, a service provider fronts you the money on your outstanding accounts receivable, which you repay once customers settle their bills. This way, your business has the cash flow it needs to keep running while you wait for customers to pay their outstanding invoices.
Eyal Shinar, CEO of small business cash flow management company Fundbox, said these advances allow companies to close the pay gap between billed work and payments to suppliers and contractors.
“By closing the pay gap, companies can accept new projects more quickly,” Shinar said. “Our goal is to help business owners grow their businesses and hire new workers by ensuring steady cash flow.”
6. Crowdfunding
Crowdfunding on platforms such as Kickstarter and Indiegogo can give a financial boost to small businesses. These platforms allow businesses to pool small investments from several investors instead of seeking out a single investment source.
“As an entrepreneur, you don’t want to spend your investment options and increase the risk of investing in your business at such an early age,” said Igor Mitic, co-founder of Fortunly. “By using crowdfunding, you can raise the necessary seed funds to get your startup through the development phase and ready to be pitched to investors.”
Tip: Read the fine print of equity crowdfunding platforms before choosing one to use. Some platforms charge payment-processing fees or require you to reach your full financial goal in order to keep any of the money you raised.
7. Grants
Businesses focused on science or research may receive grants from the government. The U.S. Small Business Administration (SBA) offers grants through the Small Business Innovation Research and Small Business Technology Transfer programs. Recipients of these grants must meet federal research and development goals and have a high potential for commercialization. [Read related article: How to Secure a Business Grant]
8. Peer-to-peer or marketplace lending
Peer-to-peer (P2P) lending is an option for raising capital that introduces borrowers to lenders through various websites. Lending Club and Prosper are two of the most notable P2P lending platforms in the U.S.
“In its simplest form, a borrower creates an account on a peer-to-peer website that keeps records, transfers funds and connects borrowers to lenders,” said Kevin Heaton, CEO and founder of i3. “It’s Match for money. A key difference is in borrower risk assessment.”
According to the SBA, P2P lending can be a solid financing alternative for small businesses, especially given the post-recession credit market. One drawback of this solution is that P2P lending is available to investors in certain states only.
This form of lending, made possible by the internet, is a hybrid of crowdfunding and marketplace lending. When platform lending first hit the market, it allowed people with little working capital to give loans to other people – peers. Years later, major corporations and banks began crowding out true P2P lenders with their increased activity. In countries with better-developed financial industries, the term “marketplace lending” is more commonly used.
9. Convertible debt
Convertible debt is when a business borrows money from an investor or investor group and the collective agreement is to convert the debt to equity in the future https://worldpaydayloans.com/payday-loans-id/orofino/.
“Convertible debt can be a great way to finance both a startup and a small business, but you have to be comfortable with ceding some control of the business to an investor,” said Brian Cairns, CEO of ProStrategix Consulting. “These investors are guaranteed some set rate of return per year until a set date or an action occurs that triggers an option to convert.”