Dive Savusavu Business

If you find that you are having difficult when looking for a business loan then there are a number of different potential funding avenues that you may want to investigate. In fact, you may want to investigate these alternative financing methods even prior to beginning the business loan application process.

In regards to obtaining debt financing, the alternative to this in general is that you could seek to raise capital from angel investors or a venture capital firm. These companies specialize in making equity investments into companies that have substantial growth potential. However, unlike a business loan, an equity investor will require that you sell shares of your business to the individual or investment firm. Additionally, many professional investors will want a substantial say in regards to the direction of the company, and they will want to sit on the board of directors.

Another alternative to a traditional business loan is a business line of credit, which much like a business loan, can be secured by real property that you already own. If you do not require one lump sum of capital in order to launch of expand your operations then it may be in your best interest to secure a line of credit that you can drawn down as needed. Much like a business loan, a formal business plan, personal financial statements, credit checks, and collateral checks will be required to secure this type of financing.

If you are already in business, you can also obtain a cash advance on your accounts receivables or credit card receivables based on your monthly volume. However, these business loans usually carry very high interest rates as they are secured ultimately by your customers’ ongoing ability to you. This is often referred to as factoring, and this method of obtaining a business loan or line of credit is really only appropriate if you operate a capital intensive business.

If you are finding it difficult to obtain a business loc or other type of revolving credit facility then you may want to solicit potential angel investors, friends, family, or other private investors for capital. As has been the common theme throughout this website, the current economic climate has made it more difficult to obtain business loc as banks and finance companies have pulled back on their lending activities. If you find yourself in this situation, then you may want to turn to private investors (often called “angel investors”).

Angel investors and private investors can provide your business with a capital infusion. Unlike business lines of credit, these investors typically provide the capital in one lump sum in exchange for a percentage of your business. This is the draw back from raising capital from a private investor. You will have to provide some level of oversight, a percentage of your business, and a certain amount of control to your company to a third party. This third party may have drastically different ideas about the direction of the business. As such, if you decided to raise capital through private investment rather than a business LOC then you should hire an excellent attorney to make sure that you are not giving up a significant amount of your business in exchange for the requisite capital required.

One of the positive aspects to raising capital in this manner rather than obtaining a business LOC is that you will not be held personally liable for the capital should the business not succeed. This is, of course, assuming that the private investor is providing you with an equity investment rather than a private loan. Additionally, this investment will not appear on your credit report. In the future, should the business grow, you can then apply for business credit lines when it is more appropriate or when the economy has improved.

In the midst of the global economic crisis, many small businesses are on the brink of closing down if not enough capital infusion is found. It is now even more difficult to get small business loans from banks, though. Ironically, the exact reasons why small businesses need such small business loans – the fact that business has slowed down and profitability has plummeted – are the same reasons why banks turn them down for loans.

Small businesses now have to be more resourceful in finding alternatives to small business loans.

Government Grants and Contracts Instead of Small Business Loans

The American Recovery and Reinvestment Act signed by President Obama in February 2009 caused the pumping of billions of dollars for the revitalization of the economy. Because of it, there are plenty of government grants and contracts available to small businesses. These can be alternatives to small business loans.

But how can small businesses avail of the stimulus program?

The Association of Procurement Technical Assistance Centers (APTAC) has the responsibility for helping small businesses obtain and perform federal, state and local government contracts. It has Procurement Technical Assistance Centers (PTAC) throughout the country, ready to help small business owners to get registered and find opportunities in the area of government grants and contracts. Counselors assist small businesses in filling out bids, proposals and quotations.

The PTAC holds seminars teaching small business owners all the ins and outs of government legalese, including acronyms and registries. A one-day seminar with PTAC covers what small business owners may take months to learn on their own.

The PTAC then helps small businesses with Central Contractor Registration (CCR), a requirement for doing business with the federal government. This registration can be so complicated that some companies take two days to do it when the PTAC counselor can help them get through it in 15 minutes.

Local PTACs will be of help in acquiring state and municipal contracts.

Other resources that small business owners should consult include the Small Business Administration (SBA) which also coordinates with the APTAC; the General Services Administration (GSA) which acts as the government’s purchasing department and provides information on becoming an approved vendor; the Federal Business Opportunities website (fbo.gov) where federal contract opportunities currently available are posted; and the Small Business Innovation Research website (sbir.gov) where grant and funded research opportunities for small businesses are listed.

Cash Advances from Credit Card Services Instead of Small Business Loans

Another alternative to small business loans are cash advances from credit card services. This option is much easier than winning government grants and contracts.

Most small businesses are already availing of credit card services that enable them to accept payments by credit cards or debit cards. This is practically a requirement to doing business these days, with people hardly paying cash for goods and services. Many small business owners do not know that they could avail of cash advances from these credit card services, though, and that such advances can actually equal small business loans.

The amount that a small business can borrow is based on its average monthly income from credit card sales. This is so because the cash advance does not require collateral and future sales receivables from credit cards stand as the collateral. Payment will also be done through automatic deductions from those future credit card sales. There will be no set monthly amortizations. Instead, a certain percentage of the sales will be allotted as payment. The small business owner, therefore, need not worry over where to find cash for loan payments.

Cash advances from credit card services are the best bet of small business owners as alternatives to small business loans.