What Is Alternative Business Funding?
If you’ve been looking at getting funding for your small business, you’ve probably already heard people talking about the option of alternative business funding. In fact, you might even be looking into it right now. Before you choose your form of business funding, it’s important to know a little bit about alternative business funding and why so many people are choosing it for their own companies.
- Alternative business funding is any form of funding that doesn’t come from a bank, a grant, or a government loan. Common forms of this funding include merchant cash advances, getting loans from independent investors, and crowdsourcing.
- The most common form of alternative business funding in the US is currently merchant cash advances. These advances are also known as MCAs. MCAs give you money by buying your future credit and debit card sales at a discount from you. Payments are automatically deducted from your weekly card sales. Merchant cash advances are notoriously easy to obtain, which is why they are often very popular.
- Many people choose alternative business funding because it’s easier to obtain than a traditional bank loan. Banks are increasingly stringent on their requirements, and people who would have qualified for a loan 10 years ago now often can’t qualify. In order to get the funding they need, they will have to turn to alternate lenders and methods. Some methods, such as merchant cash advances, have approvals up to 80% and don’t even require a good credit score.
- Alternative business funding can take many different forms – many of which are more flexible than a traditional loan. If a typical bank loan payment plan wouldn’t work for you, alternative business funding can have the options you need. For example, with crowdfunding, you might not have to pay back the loan you receive from donors. With MCA’s, smaller payments are automatically deducted out of your weekly sales until the loan has been paid off. It’s up to you to figure out which form of funding is ideal for you.
- Not all forms of alternative business funding are equal. Some are better than others, and some lenders are better than others. Before you choose any form of business funding, it’s absolutely crucial to look at the reputation of the company that you will be dealing with. There have been some cases in which sketchy lenders have caused irreparable damage to companies that had sought out their help. It may make the difference between having a great experience and watching your dream of business expansion go up in flames.
Alternative lenders and business funding methods often have an unwarranted stigma attached to them, but the truth is that they are usually just as good, if not better, as traditional bank loans. At times, bank loans may not even be the best choice for new company owners. If you aren’t sure about using alternative funding, do yourself a favor and research it first. You might find that it’s the right choice for you.