Alternative business finance is funding provided to businesses by means other than traditional bank loans. This can include venture capital, angel investment, and crowdfunding.
There are several benefits to alternative business finance, including the fact that it can be easier to obtain than a bank loan, and it can provide businesses with the capital they need to grow.
There are also some downsides associated with alternative business finance, such as the fact that it can be more costly than a bank loan, and there is often more risk involved.
However, for many businesses, the benefits of alternative business finance outweigh the risks. It can be a great way to acquire the funding they need to grow and succeed.
Find out whether alternative business funding can help your business.
As anyone who's ever tried to get a small business loan knows, banks can be challenging to deal with. They often have strict requirements for collateral and credit scores, and the process can be slow and cumbersome.
But there's another way to get the funding you need to grow your business: alternative business financing.
Alternative lenders are more flexible than banks. They are often more willing to work with businesses that don't fit the traditional lending mould, working with them on repayment schedules and collateral requirements. That means they can be an excellent option for companies that don't have perfect credit or a lot of collateral. It is generally easier to qualify for alternative funding as these lenders have less stringent eligibility requirements than banks.
Alternative financing for your small business can be a practical option if you need funds quickly. Lenders tend to work faster than banks as they don't require as much information and paperwork. Banks can take months to approve your enquiry, while alternative lenders can often provide funding within days or even hours.
And because alternative lenders are usually online, the application process is often more straightforward than going through a bank. While many banks have moved some of their operations online, it is unlikely that the whole process can be done online from beginning to end in the way it would with an alternative lender.
It is often more straightforward to get approved by an alternative funder than a traditional one.
Going down the alternative lending route opens up new avenues that wouldn't be available through a bank, such as venture capital or crowdfunding. This gives you more options and a higher chance of being approved.
Alternative funding tends to be very flexible, with no mandate on what you can spend the money on beyond being used for business purposes only. On the other hand, traditional lenders often require an in-depth reason for why you are seeking the funding. They may also want to approve the spending beforehand.
So if you're looking for a more affordable, flexible way to finance your business, alternative business financing may be the right option.
As alternative lending tends to be unsecured, not requiring collateral, they may have higher interest rates. The lender may be wary about lending large amounts of money without an incentive for the lessee to pay it back on time.
Overall, alternative business finance can be an excellent option for businesses that are looking for funding but may not be able to qualify for a bank loan.
Alternative financing has surged recently, with more and more lenders offering it. The abundance of lenders leads to competition, creating more reasonable terms for the lessee.
There are few downsides to this growth in lenders. The small business landscape is also growing, so it's not as if the market is becoming saturated - businesses simply have more to choose from.
Venture capital
Venture capitalists fund businesses in exchange for an equity stake in the company.
Angel investment
Angel investors are individuals who invest their own money in businesses, often in exchange for a seat on the company's board of directors.
Crowdfunding
Crowdfunding is a way of sourcing money from a large number of people, typically through an online platform. Equity crowdfunding is when people invest money in exchange for a share of the company, while donation-based crowdfunding is when people donate money without expecting anything in return.
Microloans
Microloans are small loans, typically under £50,000, provided by non-profit organisations or government agencies.
Some forms of alternative lending, such as venture capital or angel investment, will get you funds in exchange for a stake in the company. This could benefit you by having an extra person to help make decisions.
Merchant cash advances
Merchant cash advances are a type of funding where businesses sell a portion of their future sales in exchange for cash upfront.
Invoice financing
Invoice financing is a type of funding in which businesses sell their invoices to investors in exchange for cash.
Peer-to-peer lending
Peer-to-peer lending platforms match borrowers with individuals or institutions willing to lend money.
1. Research the different types of alternative business finance available.
2. Contact potential investors or lenders to discuss your options.
3. Consider all of your options carefully before making a decision.
4. Once you have decided on a type of financing, follow the instructions on how to apply.
5. Be prepared to provide information about your business, including financial statements and projections.
6. Once you are approved for financing, keep up with your repayments.
Research your options to find out which type of alternative funding is best for you.
To get started with alternative business finance, businesses can research the different types of funding available and then contact potential investors or lenders to discuss their options. It is important to remember that there is often more risk involved with alternative financing than traditional bank loans. Businesses should carefully examine all of their options before making a decision.
Love Finance is an alternative lender. Our loans are always unsecured, and we always try our best to get your business the most suitable deal, with a decent interest rate.
