3 financing alternatives to loans

Small businesses are the backbone of our economy. In fact, small to medium sized enterprises (SMEs) — companies defined as having fewer than 500 employees — constitute almost 100% of all American businesses, Forbes explains. And, as Oberlo reports, there are over 33 million small businesses in the country, a number that's hard to ignore.

Despite being America's financial driving force, many aspiring entrepreneurs and small business owners alike are finding it increasingly difficult to get their hands on the capital they need to establish or keep their companies afloat. Given the latest economic downturn, taking out conventional loans from banks and other traditional lending establishments is no longer a feasible option for most of these organizations, as Business News Daily explains.

The good news is that this doesn't mean small businesses have to go without. Fortunately, there are many alternative sources of financing these companies can consider. Let's take a look at a few:

Crowdfunding

This type of funding's popularity has soared over the past few years. Although people often use it to help overcome personal financial issues, it's also a viable option for anyone looking to create or run small businesses. There are many online crowdfunding platforms designed specifically for startups and small businesses, including Fundable and SeedInvest Technology. It's a great avenue if you don't have a solid strategy in place just yet, but funds can take a while to accrue.

Crowdfunding can be a great alternative to a bank loan.

Venture capitalists

Also called angel investors, these are businesses or people that specialize in putting their own cash behind small businesses. Unlike crowdfunding, you need to demonstrate a solid growth plan and explain return on investment (ROI) during your pitch, per LendThrive. This is a good alternative if you need access to funds relatively quickly and want to avoid interest rates, but you'll often be required to surrender a portion of your ownership.

Grants

As explained by Business News Daily, the government issues numerous business grants to small companies at local, state and federal levels. They're a great route to take if you don't think you'll be able to repay your loan. There's a flipside, though: You'll have limits on how to spend those funds. Acquiring a grant is very competitive and requires lots of preparation, so you need to ensure you know exactly which grant to apply for and have all your figurative ducks in a row before you submit an application.

If you're looking to start a small business or already have one and need some financial assistance, reach out to the Law Offices of Donald W. Hudspeth, P.C. to discuss which financing method is right for you.

Categorised in: Arizona LLCs, Starting a Business in Arizona

This post was written by