If you’re like most small businesses, at some point you may will want to expand, spin off a new venture, or simply pay the bills. For all of these options, you need money – and often that’s hard to come by.
Financing is often the answer, but many know well that banks aren’t quite like they seem in the movies, and loan approvals are hard to come by.
But there’s good news, as alternatives for raising cash abound. Before you give up and set those plans aside here are five other financing options to think about.
- 1) IRA or 401(k) Financing – Normally, business owners wouldn’t consider withdrawing funds from their retirement accounts to finance their company. However, with the slow economy and traditional financing being hard to come by, many are now considering this as an option. If you have a 401(k) or IRA, you can borrow against the money in your account to help finance your business. But beware: You may face a tax penalty of 10 percent for early distribution if the funds are not paid back.
- 2) General Invoice Factoring – Outstanding receivables can cause a problem for businesses that find themselves cash strapped. One way to earn immediate cash is to sell these receivables to a third party, a process called factoring. The receivables are purchased from a third party agency at a discount in exchange for immediate cash payments.
- 3) Green Financing Initiatives – Nowadays, the new trend for businesses is to “go green.” So what are you waiting for? This is a good time to upgrade your business to become environmentally friendly and help promote clean living. The good news for you: Financing programs are available for businesses that have decided to go green. In an effort to continue to encourage businesses to become more environmentally conscious, government agencies small and large have all kinds of funding options available. Check with your municipality or visit this link for loans, grants and other finance opportunities.
- 4) Peer-to-peer lending – Instead of securing a loan through a financial institution you can try peer-to-peer lending. Peer-to-peer lending is an option available for those who have less than stellar credit, letting you work directly with other individuals to secure financing for your business. Online networks like Prosper are available to assist with matching borrowers with potential lenders. As a borrower you can list your loan amount, credit details, and repayment terms, then potential creditors bid on the opportunity to fund the loan.
- 5) Purchase Order Financing – Have you ever received a large contract with a reputable company (Wal-Mart, anyone?) and found yourself lacking the funds to complete the project? It’s possible to get financing for your outstanding purchase orders. Even if you have limited credit, companies that finance purchase orders may be willing to work with your organization if the contract details are solid.