For many small businesses, securing a traditional bank would be impossible, especially if you’re launching a startup, or if you have less than two years of operations to your credit. Alternative financing can provide the working capital you need to succeed, and there are a great many options available to you under the alternative financing umbrella.
When you participate in partner financing, you have a business entity within your industry who is interested in financing your business, in exchange for access to products, sales, distribution rights, and sometimes even your staff. This opportunity is not usually structured like a loan but is instead an equity sale, or sometimes it can be a royalty situation where your partner receives a percentage of every product you sell. Generally speaking, any partner that you hook up with will be a larger partner who has access to greater funding.
In this arrangement, you would have an outside group that delivers capital to your company in exchange for some percentage of ownership in your enterprise. This is usually a good fit for startup companies that are short on cash, but which are willing to offer a piece of their company to a group that has the funding they need.
The biggest single difference between venture capitalists and angel investors is that venture capitalists tend to be a well-organized group or company, whereas an angel investor is generally an individual. Both of these entities will offer financing to your company in exchange for some percentage of ownership.
Factoring is a great way to get immediate cash in your hands in exchange for either selling invoices outright to an alternative lender, or for paying that lender once customers remit amounts owed to you. Either way, you have immediate cash which can be used to keep your business running smoothly, as opposed to waiting for customers to pay you at some later date.
Would alternative financing work for your small business?
For most small businesses, alternative financing is a better option than trying to secure traditional bank loans. Contact us at Purevue Capital if you’re interested in learning how alternative financing can help your small business grown and become more successful.