9) Crowdfunding
Crowdfunding is a smart way for some types of businesses to raise funds from their peers online. There are four types of crowdfunding: debt, rewards, equity, and charity. With rewards crowdfunding, you dont have to pay the money back; instead, you agree to give your backers something in return for their donation. With equity-based crowdfunding, someone invests in your business in exchange for a share of your business/product. You may also have to pay a fee to the crowdfunding platform itself. Learn more about the different types of crowdfunding.
Crowdfunding is only appropriate for some types of businesses. Popular crowdfunding sites Kickstarter and Indiegogo are geared toward individuals creating some sort of media (such as a movie or music album) or an innovative, consumer product (such as a new tech gadget). Several others, including GoFundMe, are geared toward charitable projects (though it is technically possible to use GoFundMe for a business). Some sites, such as Fundable, offer crowdfunding to a wide range of business types.
10) SBA Loans
US government-backed Small Business Administration (SBA) loans are an excellent alternative to standard bank loans and can, in some cases, be procured via an online lender. The SBA does not originate loans; instead, it guarantees a portion of a loan issued by a bank, credit union, nonprofit, or other lenders. As a result, the bank can offer you lower interest rates than they normally would without the SBAs backing.
The SBA offers a few different loan programs, but the most popular is the general 7(a) small business loan. It may take up to several months to receive SBA loan funds after approval, but some online lenders use technology to speed up and simplify the process of applying for an SBA loan, so you might get your loan several weeks faster.
To qualify for most SBA loans, you typically need two years in business and good credit, as well as a 10% down payment on the principal and some collateral.
Invoice factoring is a type of financing that frees up cash from outstanding invoices. Heres how it works: The invoice factoring company, or “factor,” will purchase your unpaid invoice and front you typically 85-95% the value of the invoice. The factor then collects payment from your customer and sends you the remaining amount of the invoice, minus a 1-5% factoring fee. Your factoring fee is determined, in part, by how long it takes your customer to pay.
As you might expect, invoice factoring is appropriate for businesses that frequently have unpaid invoices and have cash flow problems as a result. You might pay a sizable factoring fee, but it can be worth it if you need cash right away, especially if you dont enjoy trying to track down and collect from delinquent customers. Bad credit isnt typically a concern, as factors are more concerned with your customers ability to pay, not your businesss. As such, startups and newer businesses installment loans New York are eligible for this alternative financing option.
The two terms sound alike, but invoice financing is not the same thing as invoice factoring. With invoice financing, the financing company grants you a line of credit, using your unpaid invoices as collateral. The size of the line of credit depends on the dollar amount of your outstanding invoices. The financing company does not actually purchase the invoices, so it is still your responsibility to collect from your customers. (Remember that with invoice factoring, you sell your invoices for immediate cash, and it becomes the factoring companys job to collect payments on those invoices.)