At one time, when businesses needed financial help, they’d have no option but to turn to their bank. However, today there’s a huge range of financial sources offering an alternative to more traditional lenders.
Here, we’ll look at how funding for businesses has diversified and the options now available to those who do need financial assistance.
Crowdfunding and peer to peer lending
Two of the most recent alternatives to traditional lending suitable for small businesses include crowdfunding and peer to peer lending.
Crowdfunding is particularly popular, allowing businesses to get the money they need through a large number of people. Individuals contribute small amounts, meaning the funding comes from multiple sources, rather than just one.
With peer to peer lending, the platform is very similar. However, businesses will usually receive the funds they need through fewer individuals. Both of these options typically have a much lower interest rate than traditional lenders.
Alternative business loans
Although business loans may have become much more difficult to receive through traditional sources, there’s still great alternative options available. You’ll find plenty of unsecured business loans out there which can be very useful for start-ups in their early days without the assets to take out secured loans.
The great thing about unsecured loans is that your business won’t be at risk if you can’t afford the repayments further down the line, and just having a diverse range of loans allowing businesses to select the one most appropriate for them is an ideal scenario.
As well as loan and crowdfunding, there’s a few other alternative credit options available to businesses today.
Asset finance is ideal for businesses with a lot of assets but poor cash flow. The finance can be secured upon the assets, allowing the business the funds it needs to grow. Invoice factoring is another option on offer. Businesses can choose to release some of the money owed to them through invoices early. This is a great option for those experiencing temporary cash flow issues.
Company credit cards are another option, though these would be best suited to businesses with small cash flow problems. There are also lines of credit, which enable businesses to have a regular credit line they can tap into if needed.
As you can see, there’s lots of different options businesses have today to secure the funds they need. Whether you need short term or long-term financial assistance, there’s always a funding source you can turn to. As technology continues to develop, it’s likely we’ll start to see a lot more funding options opening up. It’s important for businesses to understand their options before choosing the best one to fit their needs.