By Larry Alton
While most small businesses run to the bank when they need a new line of credit or working capital, it's not always as simple as setting up a meeting and getting a pile of cash. In the wake of the recession, many banks still hesitate to give small businesses money. If that happens to you, what's your next move? Well, the good news is that you have plenty of alternative strategies to secure financing for your small business.
Importance of Securing Lending
Entrepreneurs and business owners often become so frustrated with the lending process that they give up and stubbornly attempt to pursue growth on their own. This is a grave mistake. Before digging into some of the alternative strategies available to you, let's quickly review why it's important to secure lending. Without working capital, you can't do any of the following three tasks essential to small business growth:
Expand. Successful businesses scale over time, but working capital is necessary to encourage growth. If you're strapped for cash, it's impossible to expand—whether that means building more locations, adding new products, hiring more employees, or anything in between. It takes money to make money, and that's one reason your business needs working capital, sooner rather than later.
Purchase inventory. "Due to seasonal shifts in the number of sales and cash flow, businesses may experience a greater demand for a product at certain times of the year," Kari Luckett writes for Entrepreneur.com. "An inventory loan can help bridge that gap." Having a line of credit available to purchase inventory on an as-needed basis is extremely valuable. It allows you to make decisions on-the-go, as opposed to planning months in advance.
Marketing and advertising. Without working capital, it's nearly impossible to fund effective marketing and advertising campaigns. Grassroots efforts can get you only so far. If you want a real budget that lets you increase sales leads, you need a source of funding. At some point you need to invest in more visibility, and working capital enables you to do that.
Best Ways to Get Your Hands on Working Capital
"Nine out of ten businesses try to go to a bank first," Noah Breslow, COO of an alternative lending company, told Fox Business. "They have this idea that they should walk into a local bank branch, because it's the fastest and most effective way. Banks are diverting their attention away, trying to fix other things in their business, and they're not focused on growing their small business lending portfolio."
If you want to get your hands on working capital, you may be better off working with an alternative source of capital. The process is easier, quicker, and less rigid than walking into your local bank. Here's a look at some of your different financing options:
Private lending institutions. One of the first options to consider is a private lender. Ideally, you should look for one belongs to the American Association of Private Lenders. You'll find a handful of members in each state, and their independence lets them be more lenient when lending. A private lender may not work in your situation, but it's a good place to start.
Alternative online sources. You'll find plenty of other alternative forms of lending, especially online. For example, a company called Credibly leverages data science and technology to deliver loans of up to $250,000. Because the company operates on its own terms, the entire approval process takes a fraction of the time it would when dealing with a bank.
Crowdfunding and crowdlending. You'll find plenty of crowdfunding options including companies like Kickstarter and GoFundMe. Likewise for crowdlending—starting with InvestNextDoor and Borrowell. Bear in mind that research and due diligence are crucial. There are so many of these alternative funding platforms, and some are far superior to others.
The Freedom of Alternative Lending
Just because the bank says no doesn't mean you can't secure funding for your business. You simply need to know where to look. Thanks to the power of the Internet and new methods of lending, your business has never had a better opportunity to raise funds and pursue growth. This freedom has allowed thousands of business owners to achieve their dreams— could you be next?
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