Alternative business finance explained

We speak to business owners every day who are growing their businesses, exporting to new markets, or looking to refinance and restructure their business to ready them for the next stage of their journey.

Business owners and entrepreneurs who require a cash injection for their operations will usually speak to their bank first and foremost. But it’s a well known fact, and widely reported, that banks are refusing more and more businesses from access to finance. Why is this so? It’s not the fault of the business, but more the fundamental economy. Since the economic crisis in 2008, government legislation forced banks to maintain liquidity ratios and capital requirements meant that banks can no longer take the risks they used to take, in order to protect the customer’s money. As a result, business lending, which is often seen as a relatively risky investment to a bank has shrunk, resulting in many viable businesses being unable to access finance.

We’ve summarised a few of the innovative structures businesses use to access finance to grow:

Asset finance

Another form of alternative business finance that has become somewhat popular relates to your assets. Asset finance is often suitable for companies that need new equipment but don’t have enough cash in their accounts. They can use asset finance to sell and leaseback tools and machines they already own to improve cash flow. It usually involves making regular payments for the use of the asset over an agreed period of time, and that means you don’t have to worry about buying the items outright from day one.

There are many benefits to choosing asset finance including the low ownership risk. You’ll find lots of companies out there that offer asset finance deals, and many of them involve different things. So, conduct as much research as possible and always read the small print.

Crowdfunding

Let’s presume you come up with a product idea that could help millions of people to save a lot of time and hassle every day. You know the concept has mass appeal, and you know it could make a small fortune in profit, but you don’t have the cash you need to get things off the ground. In that instance, crowdfunding could work well for your business.

There are hundreds of websites where you can publish details of your campaign and appeal for donations. You’ll have to promote those pages heavily on your social media accounts and in any other ways possible. Sometimes business owners offer rewards for donations like free gifts or something similar. Consider doing that to encourage more people to engage and get onboard.

Peer to peer loans

Peer to peer lending websites are excellent places for business owners to find support for their latest projects. The platforms work by linking investors with lenders and facilitating the financial arrangement. All you have to do is create a page that describes the project and provides visitors with as much information as possible. It should also explain how much money you need to get things off the ground, and how much you can afford to pay back each month.

If an investor using the platform with enough funds likes the concept; they might get in touch and try to make a deal with you. Make sure you don’t overlook peer to peer loans because business owners tend to achieve just as much success as they do when crowdfunding.

Now you know the ins and outs of some of the best alternative business finance options available to you today; you should be in the perfect position to research each of those ideas and determine which is right for your project or brand. Of course, nothing is wrong with accepting traditional business finance, and so lots of entrepreneurs will decide to take out a secured bank loan or something similar. However, you live in the digital age, and so it is always sensible to make use of modern technology and all the benefits it brings. Crowdfunding and peer to peer lending would have been somewhat difficult without the internet.

Whatever happens, diligence and preparation is key to financing the growth of your business, whether it’s your first or hundredth time to raise finance.

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