Small businesses are often faced with a shortage of capital. Traditional business loans may be out of reach for these companies due to insufficient credit history or other factors, but alternative financing may fit the bill.
Small Cash Advances
Small businesses may suffer from more growing pains than their larger counterparts, and a micro business that needs to scale may need to do so right away. Sometimes the only things making the difference between scaling and ceasing operations are things like equipment upgrades, a bulk order of materials or a single employee to help things run smoother. Making each of these improvements may cost only a few thousand dollars at the outset, and large banks may not want to lend such small amounts; traditional business loans may not be available in amounts lower than $200,000 or so. This is where alternative financing can come in handy, filling the gaps left by standard banking options.
Time Is Money
Another area where traditional loans may not fill the needs of small businesses is the time factor. At times, small business owners find themselves faced with opportunities that are too good to pass up, such as deeply discounted materials, equipment or inventory. Securing a traditional loan to cover such expenses typically requires a comprehensive business plan, extensive financial forecasting and so on. Preparing and filing all the paperwork takes time, and the bank’s approval process takes even longer. Alternative financing, on the other hand, may be a much quicker way for businesses to get the funding they need. This is especially important for small businesses when a piece of equipment fails or when they need to take advantage of a limited time offer and do not have enough working capital.
Borrower Beware
The fact that some forms of financing may be quicker and easier to get does not mean they are risk-free. Always count the total cost when deciding what type of funding is best for your business, and do not take on more than you can reasonably afford. Before agreeing to a contract, be sure you know what the terms are and what will happen if you find yourself unable to repay your debts.
Owning a business is exciting work. As you push through each challenge your business throws at you, you may find yourself eager to confront the next. With a combination of proper planning, hard work and alternative financing, you may find that your business grows by leaps and bounds and pushes the boundaries of what you thought was possible.
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