Small Business Access to Alternative Financing
The business owner seeking capital is finding it a challenge to access capital through traditional markets, specifically the banks. Accessing capital for expansion or survival is crucial. Where are these individuals to go if their banks are not lending? This is where non-traditional capital sources are vital. If the business owner is not aware of these sources, this could mean the loss of business, employment layoffs, and much more. But there is hope! You just have to know where, when, why, who, and how!
Where To Go
Non-traditional lenders are sometimes referred to as Alternative Funders. Many of these funders can be classified as private lenders, asset-based lenders, factoring funders, purchase order funders, to name a few. They are private sources who have the capital and/or the backing of private investors who have the capability to assist many small business owners access the capital they so need.
Niche Funding Areas
Alternative funders specialize in niche areas. Examples of these include, but are not limited to the following:
1. Accounts Receivables – these include medical, construction, government, commercial;
2. Asset-Based – which includes real estate, equipment, inventory, machinery, receivables;
3. Contract-based – to include purchase orders, government contracts, and consumer contracts.
There are many more niche areas and niche funders. You just have to locate a source in that market.
Niche Industries
In addition to niche areas, there are also niche industries with specialized financing options. These include but, once again, are not limited to the following: technology, medical, construction, staffing, security, manufacturing, printing, wholesaling, auto, trucking, and many more. If your industry is not highlighted, do not despair, there are sources out there for you too.
Accessing an Alternative Source
When you decide to seek outside financing, there are many questions to ask. You might ask yourself, “How do I access such a source?” First, you must understand your industry, how you relate to your clients, who are paying your invoices, and much more. An alternative funding source reviews a potential client for funding in a different manner from the way a banker would.
This source will take into consideration your current operations, contractual obligations, contracting opportunities, and all the potential risk of funding a small business owner’s request. They can make a more informed decision than the banker could. The funder has the capability to make these decisions based on the future expected growth of a company, while the banker looks at the past history.
Alternative funders like to develop long-term relationships with their clients. Once you have developed a great relationship with such a source, you can use their expertise to help guide your company in the right direction. It is the greatest accomplishment for them to take a client from near disaster, bankruptcy, negative cash flow; you name it, and turn them around.
Where to Find Alternative Funders
Alternative funders are everywhere. You just don’t hear about them. Bankers sometimes don’t know they exist. Bankers who do know of these sources will sometimes refer clients to these types of funders. If you are in need of funding, ask your banker, your CPA, or even your attorney to assist you in locating one of these sources.
You can also check with your local business consultants, chambers of commerce, or community business centers in your area for assistance. If they cannot help you, then contact a source such as myself who does specialize in this area of funding.
Decision Time
When is the right time to seek alternative funding? You have to decide when and if this is the right avenue for you and your business. Timing is everything.
This boils down to two things:
1. Are you willing to take the next step to grow your business?
2. Are you serious?
It is decision time! Taking the next step to help you and your business get to the next level is important but you must be open to these non-traditional means of funding your business. Remember, you do not have to allow the current economic climate to be drawback to you. Get the capital your business needs today!
