8 Creative Ways To Raise Money For Your Business When The Bank Says No
Posted on: 10 December 2018
When the bank says no, it could be the end of a dream, but it doesn't have to be. Get creative. Think outside the box - that's what entrepreneurs do. There are plenty -- PLENTY! -- of ways to find money when the bank won't loan you any.
1. Credit Cards: Maxing out credit cards to bootstrap a business is not ideal, but it often gets the job done. You have to believe in yourself and your ability to succeed. While not particularly sound financial advice, entrepreneurs are a different breed and will do anything to make it work.
2. Personal Loan: Many small business owners cannot walk into a bank and ask for a personal loan in the name of their company. The company is often too small or has yet to establish its own credit. A personal loan in the name of the owner, however, is possible. Talk to your accountant about how to transfer the funds to the business and how to properly pay yourself back each month.
3. Auto Title Loan: If the bank won't give you money for your business, try to get money for your car. An auto title loan essentially creates a loan for the value of your car. You can use this money as you see fit. If you have an existing loan on your car, you may be able to re-finance it and take additional funds out.
4. Crowd Funding: The idea of crowd funding is a relatively new player in the small business funding arena. Instead of asking a bank to loan one, large lump sum entrepreneurs use online crowdfunding sites to tell their story and ask individual investors for smaller amounts, as little as $5. While the money is not paid back like a loan would be, it is generally traded for a first-run or limited version of the product.
5. Micro Loans: Micro loans were once geared for Third World entrepreneurs in order to give them a helping hand. The loans paid for things like chickens or seedlings. The trend towards smaller is better, however, has gained steam. Microloans have become an appealing source of funding for small businesses who don't need much to get their business to the next step. If you just need $500, for example, to buy a piece of equipment, a microloan may be just the ticket.
6. Cash Advance: Yes. Yes, cash advances or payday loans have a bad rap. If you use them to pay for your basic living expenses, they can be predatory. If, however, you use them strictly to move your business ahead and pay them off in a very short period of time, it can work. It may not be ideal, but when you are bootstrapping a new business, you do what you have to do.
7. Invoice Factoring: If your business has existing clientele, you could sell the outstanding invoices to a company that specializes in such things. Called 'invoice factoring', it has proven to be an effective way of evening out irregular cash flow. Simply put, outstanding invoices are sold at a discount. You get your money upfront while the factoring company waits for the due date on the full amount from your client.
8. Friends and Family: Borrowing money from family and friends is usually the last item on many people's lists. It is possible, however. The key is to treat the situation like a business arrangement. You can either borrow the money with interest and set up a regular payment schedule or you can 'sell' them a portion of your business. Choose whichever way works best for your relationship and be sure to put every detail in writing.
The word 'no' doesn't have to be the end of the line. Put that thinking cap on and be resourceful when raising money for your business.
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