When you are starting a new business, traditional lending options might not always be available to you because you don’t have any sort of trading history behind you.
There are certain things that you should be able to do without any difficulties, such as open a vape merchant account, for instance, if that’s what you need, but you may have to think outside the box when it comes to secure funding to get your startup going.
Here’s some less mainstream borrowing options that might enable you to secure the level of funding you need to hit the ground running.
Crowdfunding is a good starting point
When bank loans aren’t an option a good alternative to consider would be to see if you can raise the money you need through crowdfunding.
This idea works well because it spreads the risk across a number of small investors. This makes it more attractive for someone to consider lending money in this way as it offers rewards to investors while minimizing their financial exposure.
There’s a plethora of suitable crowdfunding platforms to choose, so definitely explore this option.
Private debt funds are proving popular
There are investors around who have specifically created private debt funds so that they can look for lending opportunities that give them a better return on their cash than leaving money on deposit.
You should find that deals offer more flexible terms than you might get from a bank. However, the sting in the tail is that you can expect to pay a higher rate of interest on your loan to reflect the risk the private debt fund is taking in lending to a startup.
Offer a good deal to your first customers
Another unconventional option to consider would be to see if customers who want to do business with you from day one might be happy to pay upfront for a better deal.
The obvious advantage to you is that it gives your cash flow an immediate boost. This arrangement could prove to be a win-win for you and your customers.
Borrow against future sales
If you are confident that you will be able to generate a certain level of turnover within a relatively short space of time, another possible idea to explore would be revenue-based financing.
Quite simply, this involves borrowing against future sales invoices, often for a better rate than you would be charged for a straightforward business loan.
Pitch your business expansion plans to key strategic customers
If you have secured the interest of some decent companies who are willing to do business with you straight away, it might work to pitch an idea that would be mutually beneficial.
In essence, what you are doing is asking whether these customers would be willing to provide some short-term funding in return for preferential treatment and attractive prices.
Consider using your personal credit availability
Maxing out your credit cards could be a dangerous and costly strategy, especially if things don’t go to plan. However, if you have a degree of certainty, such as a contract to fulfill, you could pay for things on your card and clear the debt when your invoices are paid.
Friends and family are often a viable source of funds
The problem you have when trying to borrow money from a bank or lender is that they don’t really know you. On the other hand, friends and relatives will often share your confidence and enthusiasm for a business venture, and be prepared to stump up some cash to get you started.
It’s always wise to formalize these borrowing arrangements, despite the personal connection. It removes any strain or uncertainty about what has been borrowed and how it is going to be repaid.
Take a look at these more unconventional ways to fund your startup and see if it gets you the cash needed to turn your idea into a successful business.