It’s one thing to build a business when investors are throwing money at you, but it’s another when you need to go out and raise capital on your own. There is nothing more frustrating than having an idea for a new product or service that would help bring in millions of dollars worth of revenue, only to realize it will be nearly impossible to bring it to life. Luckily, there are a number of different ways that you can secure funding for your business.
Seeking Fundings for your business:
Traditional Business Funding
The first and most common way to secure funding for a business is through traditional business funding sources such as banks, venture capitalists, angel investors, personal funds, etc.
The following are just a few of the alternative ways that you can secure funding for
To see what this looks like, let’s use a real-life example:
Imagine you have an idea for a new product and you want to create it. This product is going to cost $50,000 to build and market so you want to sell 25 of them in order to get enough money back from each sale that you can call the product profitable. So, what do you do?
Banks may be the first place that you turn for this kind of funding, but they will likely be more of a “one-size-fits-all” source. They’ll attempt to secure funding for your business whether you’re a startup or an established operation, and if they can’t help then you’ll be left without that capital that you need to start up your business.
In the past, banks have been the most used source for funding a start-up because it’s been relatively easy to secure funding from these sources. Until Now.
With the prevalence of online options that are more readily available, it may not be advisable to rely on traditional business funding sources. Compared to other options, banks are more of a “follow” process. When you have to contact a bank and apply for a loan, you will be following strict regulations, jumping through hoops, going through red tape, you name it!
Alternative Business Funding
Nowadays, there are a few more alternative business funding sources that you can try. These are funding solutions that are faster, easier to access, and overall better for small businesses that want to get their idea in front of an investor. These may include sources like crowdfunding, angel investors, IPOs, etc.
Here at Corporate Capital Direct, we take a methodical, step-by-step approach to these alternative business funding options, leading you through them rather than forcing you to follow them.
The following are just a few of the alternative ways that you can secure funding for your business.
An SBA loan can be used to start a business or expand one. It allows small businesses that have been in operation for two years or more to receive loans of up to $5 million, and this includes working capital and asset-based loans. In order to apply for an SBA loan, you must have a credit score of 680+, at least 12 months of business experience, and a complete understanding of your business’s financial history.
SBA Loans are a good choice for small businesses because the process is relatively quick and easy to complete.
The advantages of this loan include:
- 100% Financing Available for Commercial Real Estate Purchase (Owner Occupied Only)
- LTVs up to 200%
- 10 to 25-year terms
- Rates – WSJ Prime + 2.25-2.75%
- Loan Amounts – $250,000 to $5,000,000
Cash Flow Based Term Loans
A cash flow-based term loan is one of the best possible sources for your funding because it’s tailored to your business’s needs. There are no restrictions on how you can spend your money and there are no penalties if you pay back the loans early. This means that you do not have to make monthly payments nor do you need to wait until a repayment date to use the funds that you receive.
The cash flow-based term loan includes:
- Funding up to $400,000
- No prepayment penalties
- 8 – 20% APR
- 1 to 3-year terms
Business Revolving Line of Credit
A business revolving line of credit is another good choice for businesses that want to secure funding. This type of loan is available to all different types of businesses and offers a competitive interest rate. These loans are considered to be “unsecured” which means that you don’t have to put up any collateral in order to receive them, unlike an SBA loan or other types of business loans.
A business line of credit is a great way to secure funding because it allows you to receive your money as soon as the next day and there are no restrictions on how you use the funds that you receive. This can help with cash flow issues for small businesses that have steady revenue coming in every month.
The advantages include:
- Fast access to capital
- No hidden fees (or double-dipping)
- No collateral or personal payment guarantee
Asset-Based Revolving Line of Credit
An asset-based revolving line of credit is best used when you need to access your funds quickly. It works in much the same way as a regular line of credit, but there are usually fewer restrictions on it than other types of short-term loans. The money that you receive can be used for any purpose and repaid at any time or on a specific date. There is usually an interest rate for this type of loan and it may vary based on the length of the term and how much you borrow.
This line of credit includes:
- Funding up to $5,000,000
- Funding in 4-7 days
- Term annual renewable facility
Traditional Funding vs. Alternative Funding
When it comes to your business, no matter what industry you’re in or how much money you make, it’s important to take your time and identify which type of funding is the best fit for you.
If you’re not sure where to start, talk with the experts at Corporate Capital Direct for more information about business funding options. We can provide you with alternative business funding and help turn your dreams into a reality. We understand the challenges that face small businesses and we look to solve those problems on a case-by-case basis. Feel free to check the Corporate Capital Direct website for more information, or give us a call at 1 (800) 261-6478!