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Understanding the new generation of business funding

There’s a new generation of lending available for small businesses. Cash flow lending, crowdfunding and raising equity are some of the ways 21st century businesses are raising capital to grow.

There’s a new generation of lending available for small businesses.

Cash flow lending, crowdfunding and raising equity are some of the ways 21st century businesses are raising capital to grow. And for brokers, it’s the smart choice to stay across how your clients might raise funds for their business.

Here are the pros and cons of three new ways to raise capital, as well as some Australian small business success stories.

Cash flow lending

Cash flow loans are usually short-term loans to make the most of a business opportunity.

Cash flow lending in action: Bossman Barbers

When business took off for Bossman Barbers, the traditional barber shop in Ringwood East wanted funds to grow. They used a Prospa cash flow loan to add capacity – more chairs to cater for a growing clientele – without taking on risk with a big bank. Jessica from Bossman describes the process as quick and simple.


  • Faster applications and less paperwork than traditional loans.
  • Repayments structured to be cash flow friendly.
  • Transparent on total amount to be repaid.
  • Diversify your client portfolio and create a long-term revenue stream.


  • Some lenders don’t use a factor rate, leaving owners susceptible to interest rate rises.
  • There are some unscrupulous operators around. Look for a credible lender with specific expertise in the small business cash flow niche.

Prospa tip: Partnering with a lender that has cash flow expertise puts you on the front foot with clients who are looking for this form of finance.


For businesses with a big idea, crowdfunding can be a great fit. It tends to work best for innovative consumer products with great visuals and ‘I wish I’d thought of that’ ingenuity.

The most common crowdfunding model is based on rewards and incentives – a ‘backer’ pledges money to support your business or product idea and, in return, they get a discount on the new product or another reward.

Crowdfunding in action: ButterUp

Aussie startup ButterUp successfully funded their butter-spreading knife using a Kickstarter campaign. To bring their new knife (with built-in grater) to market, 15,251 backers pledged $360,286.


  • Business owners keep full ownership.
  • Your clients are your investors – you have direct access to feedback from your market.
  • Low risk for small amounts.


  • Fees of around 5%.
  • Some platforms are all or nothing – no access to funds if the overall goal isn’t reached.
  • Need to commit time and resources to promoting the campaign and managing backer interaction and updates.
  • Committed to providing promised incentives even if business development doesn’t go to plan.

Prospa tip: It’s important that businesses are across the terms and conditions on their chosen funding site so everyone is clear on their rights and responsibilities.

Equity raising

Selling equity – offering shares in your business – is another choice for raising funds as a startup, or for businesses ready to grow.

Equity might be raised through:

  • Family and friends.
  • Angel investors (private investors targeting startups).
  • Venture capital firms (institutional investors looking for high-growth opportunities from $500,000 up).

Equity raising in action: Sleeping Duck

Birchal, OnMarket and Equitise are among seven Australian equity crowdfunding platforms granted Australian Financial Services licences in January 2018. One of Birchal’s flagship businesses is Sleeping Duck, which famously turned down a $500,000 investment offered on Shark Tank. The customisable mattress startup used equity raised on the Birchal platform to launch their Variable Firmness System mattress in late 2017.


  • Get a business off the ground.
  • No interest payments on an investment.
  • Less risk to personal assets.


  • Owner may lose some control over business decisions.
  • Investment from family and friends may be tricky to manage.
  • Monthly payments to investors when business turns a profit.

Prospa tip: Startup incubators are part of an investment model (popular in the tech space) that gives new businesses access to capital, resources and mentoring in return for business equity.

Keeping up with the lending revolution

When opportunity knocks for small businesses, there’s a range of new choices for raising funds. Being the savvy broker who understands the brave new world of lending puts you in the best position to help your clients and build your own business and reputation.

If you have a cash flow scenario you’d like to share, or to find out how Partnering with Prospa can benefit your business, call us today on 1300 964 808 or email [email protected]. Apply to be a Partner here. Log in to the Prospa Partner Portal here.

The information in this post is provided for general information only and does not take into account your personal situation. Nothing contained in this post constitutes advice or an endorsement or recommendation of any kind by Prospa. Any links to third party websites are strictly for informational purposes only. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.