6 Creative Ways to Secure Business Funding

Feb 29, 2016

It has been some time since banks have been in the generous “give a loan to a small business with no collateral” mood. In fact, the majority of banks stopped feeling this way back in 2007. Since then, small businesses have struggled to find the business funding they need to hit the ground running. Believe it or not, a loan from a bank is not the only option for the small business owner. There are many different ways that you can fund the growth of your business – without the endless tug-of-war with a bank.

Steve D. Strauss, often called “the country’s leading small business expert” – also an internationally recognized author, lawyer and speaker – shared in his book, Get Your Business Funded, numerous ways a business can secure the funding it needs. Consider the following 6 business funding options:

  1. Factoring

The factoring method of securing funding involves you selling your accounts receivable to a third party for immediate cash (i.e. The Receivables Exchange). While this is a booming industry going back to the ancient times of Babylonia, keep in mind that factoring is expensive; it can cost up to 15 percent of the receivable. In addition, it is not ideal for startups or businesses that are shrinking or losing money.

 

According to Strauss, “But for those more established companies that do have money owed to them every month, factoring can be a great solution. It can provide immediate working capital for inventory, payroll, improved facilities, projects, anything.”

  1. Government Grants

These programs will require research at local, state and federal levels. These agencies will include the USDA, the Department of Commerce and the Treasury Department, to name a few. You can also expect them to be accompanied with names such as, SBIR, STTR and SBIC. When searching for government grants, keep in mind that they are typically very specific and technical in nature. More than likely, they will also come with reporting strings attached. According to Strauss, governments want to help businesses succeed since it is good for the health of their respective economies.

  1. Retirement Accounts

Another funding option is borrowing money from your IRA or 401(k). You should start with inquiring after a 60-day interest free loan from it; there are no fees involved if the loan is paid back during that time frame. However, keep in mind that borrowing money from your retirement is incredibly risky and potentially devastating in the event that you lose your business.

  1. Crowdfunding

Crowdfunding is a unique type of funding since the money is not repaid. You are convincing people to invest in “your cause” in exchange for something else – other than money. These rewards range anywhere from receiving your very first products to having one of those products named after them. According to Forbes some of the most popular crowdfunding sites include: Kickstarter, Indiegogo, RocketHub, FundRazr and GoGetFunding. Keep in mind that crowdfunding is a very emotional form of securing funding. Success is completely based on your idea and its appeal.

  1. Microfinancing

Even though this is a relatively new method for the United States compared to other business funding options, these small loans have quickly gained popularity. They are based on the individual’s experience, passion, market opportunities and sales. Microfinancing works best when you have an appealing idea to offer and only need a small amount of money. Some organizations include: Accion USA, Kiva and Grameen Bank.

  1. High Risk Business Funding

For businesses categorized as “high risk” by traditional lending sources, there may appear to be little to no options available. High risk specialists – like EMB – offer such businesses the business funding they need to stay flexible and react to changes, needs and opportunities. Unlike traditional lending sources, the documentation requirements are simple, and the application process is both fast and hassle-free. Once approved, working capital is supplied within 5-7 business days, if not sooner. The great advantage is that a high risk specialist is familiar with the specific needs of high risk industries and have tailored their services accordingly.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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