Small businesses generally have a difficult time obtaining the financing they need to grow. Barriers to growth capital can seriously hinder an owner’s plans for expansion. According to the Federal Deposit Insurance Corporation, the last 20 years have seen a significant decrease in banks’ lending to small business:
- In the mid-1990s, small business loans represented one third of all business loan balances; today it’s down to one in five.
- Last quarter, overall business lending grew at an annualized rate of 10.4%; but small business loans grew a meager 2.2%.
Many innovative small businesses are saying no to traditional capital sources and are instead leveraging other sources of funding with higher approval rates and faster funding to break down barriers to growth capital.
Let your customers fund your business
Crowd funding websites allow small businesses to post projects that need funding and allow consumers to pledge donations towards making the projects a reality. These websites are a great way to test potential interest in new products and actually obtain development funds from future customers. OUYA, a developer of video game consoles, used Kickstarter, the leading crowd funding website, to raise a record $8 million to fund a new console from customers and fans. This money was interest free and didn’t require the owners to give up any equity.
Think small on your way to large growth with micro lending
Micro lending companies and organizations offer entrepreneurs and small businesses access to limited amounts of capital, typically less than $20,000, to fund their businesses. Many micro lenders have a social mission and their goal is to build successful small businesses. So in addition to the money, recipients also have access to advice, mentors, training sessions and other value added services. Since the funding is relatively small, this is best suited for new businesses operating in a local market.
Breaking the barriers to growth capital: tap into merchant financing
Based on your transaction volume with credit card merchant processor, you can access up to $500,000 per month or more in financing in exchange for a flat fee. The application process is simple and if approved you can have the funds in a matter of days. One time loans and monthly loans are available. Merchant financing gives you the resources to pay your bills when they are due even if you won’t collect from customers until later in the month.
Traditional sources of capital may shun small business but there are alternatives available. Why not try one today?
