If you are considering opening up your own business, you are probably looking for a good funding method that would be right for you. You may be doing the same if you already have a business but need some extra financing. There are a variety of small business financing sources for you to choose from, but the first one you may have thought of is a bank loan. Now, these may work for some, but they do have some disadvantages. The bank may require personal guarantees to make sure they get paid, you will probably need to have a good credit history and the bank may be strict with how you use the funds. Luckily, there are alternative sources, and here are just a few.
One small business financing alternative is to utilize vendors. In this method, you will be financed by your suppliers. A good example of this would be an electronics company funded by consumer electronics firms. A good benefit of this is that your financers will not have control over your company’s growth; you will have the final say. One thing to be careful of is enslaving yourself to a few large, influential suppliers in the industry.
Another small business financing alternative is getting funding from your friends and family. This can be rather easy, as there will be no approval process like with a bank loan. They will also probably not want any collateral. These people may also be very lenient with you, and they will likely not tell you how to use and not use the money. Just remember, they are still lending you money, so you will need to pay them back.
There are plenty of other options, and another one is bootstrapping. This may take hard work, but it can be very beneficial. In this method, a person will grow their company with personal finances or from the revenue they earn. They do this without financers who may have the ability to take a portion of ownership in the business or control the way things are run. This way, you remain in control and operate the business how you see fit.
If you are still looking for other methods of small business financing, you may want to look into a Small Business Innovation Research grant. This is an excellent way to convert your intellectual property to money for company funding. Now that you know some bank loan alternatives, it is good to know that you should use many different funding sources instead of just one. That may benefit you in the long run.