Leftfield Funding Sources For Your Business

Businesses all over the world are currently struggling to make ends meet as economies teeter on the edge of recession. Even established businesses are finding it tough, so if you are bringing a new business to market and are looking for funding, things are not going to be easy. Despite the fact that they have been ordered to release funds to small businesses to kick-start the economy, most banks and financial institutions (the ones that got us in trouble in the first place) are refusing to loan to anyone and have significantly tightened their belts. Consequently if you are starting your own small business venture then it is important right now to be able to think a little leftfield in order to raise much-needed funding. Indeed with the economy in the state it is in at the moment business funding has never been so crucial, as is the knowledge that the funding would be available if times get tough. And when the banks are all saying no you may want to look at one of these alternatives:

P2P (Peer-to-Peer) or Social Lending – This first source of funding is one that has become increasingly popular in recent years and one that is often the first port of call for many up and coming entrepreneurs, even before they try the banks. Peer to Peer lending is a type of lending that is offered by websites acting as brokers between potential borrowers and lenders. You approach the site and fill in a form outlining the kind of loan you are after, including the amount, the repayment period and the interest rate you are (ideally) looking for. The broker will then try to match your loan with someone wanting to lend money on similar terms. If there is not one person offering the total amount then they will combine two or three loans from a number of different lenders. The rate you are offered will depend on how good your credit score is, as well as a number of other factors. The best thing about P2P lending is that it doesn’t involve any bank or financial institution and the site takes care of all the legal paperwork and details.

PO Funding – Purchase Order Financing (or Funding) is an innovative way of borrowing money for businesses involved in wholesaling, retail or distribution and who are going through any kind of problems with cash flow. For these types of businesses Purchase Order Financing represents a new avenue for raising funds, but it depends on those businesses having proof of purchase orders waiting to be fulfilled. So long as they have a number of established and credit-worthy customers waiting with orders, they will be able to borrow against those orders.

Crowd-Sourced Financing – This is very similar to the aforementioned P2P financing because it consists of a number of people handing over small amounts of money as a loan to your business. All of the individuals will loan as little or as much as they want to your business, depending on how much they believe in your business idea. However, unlike a normal loan, crowd sourced funding is often about belief in a project rather than a direct investment. It also allows people to request repayment in terms other than money. This could mean instead of loaning you money for your new comic company and expecting money back, they actually can request a character be named after them in your first book. Or if they invest in a movie they might get a credit at the end of the film. Other people may ask for shares in the company. It all depends on the nature of the business seeking funds.

Angel Investment – Lastly, there are Angel Investors who will take a punt on your business if they think it is going to make it big. Normally they will invest in dot.com businesses and by providing you with start-up funds or investment they will expect equity in your business in return.

Esther is a financial blogger. She writes about everything from small business advice to financial software and from taxes to mortgages. She also writes a blog for a Chicago DUI attorney.