Getting finance is crucial to starting your business dream, and it does not get any less important once you are up and running. With traditional business financing sources often difficult to access for small business owners and tradies, fortunately there are more alternative options for business funding than ever before.
1. Online Lenders
More and more Australian entrepreneurs are turning to online lenders to quickly raise finance to help manage cash flow and grow their businesses. Lenders like Prospa offer small business loans of up to $250,000 with approval in minutes and funds transferred into your bank account usually the same day you complete the online application process. The major benefit of these types of loans is no security is required, which means you don’t need to put your family home on the line.
Larger loan amounts are available, typically requiring slightly more paperwork, and potentially some form of asset security, however these still far simpler and quicker than a traditional business loan.
The ability to borrow large sums of money within a 24-hour period is making these loans one of Australia’s favourite forms of small business funding.
Invoice finance is a popular method of maintaining cash flow for small businesses waiting for debtors to pay their invoices. There are two types of invoice financing:
Invoice factoring: selling your invoices to a third party at a reduced cost in exchange for instant payment;
Invoice finance: Using an invoice you have issued as security to obtain a loan.
Some invoice finance services, like Prospa’s InvoiceNow, offer 100 per cent of the invoice value, in exchange for a small drawdown fee and an ongoing weekly interest rate.
Invoice financing is popular for small business service providers, agencies and tradies, who often face cash flow issues after completing projects and purchasing materials and then experiencing delays before being paid for their work.
3. Venture Capitalist or Angel Investor
If you need a large cash injection, and want some advice in managing growth in your business, then venture capitalists or an angel investor may be the best option.
If you follow this approach you will relinquish equity and usually a substantial degree of control, but in exchange will receive experienced guidance and the backing of one or a pool of wealthy investors focused on helping you take your business to the next level. Often looking to invest millions of dollars at a time, these funders typically look to get payback on their investment within two to three years.
Businesses around the world have successfully convinced total strangers to pool funds together to help them launch their next great idea, often through websites like Kickstarter and GoFundMe. However, you need an attractive project or business model to get interest from potential funders, who may expect various rewards in return like a percentage of revenue, free product or the opportunity to help in the design process.
There are over 600 crowdfunding sites globally. Some sites like VentureCrowd allow you to offer shares or equity in your company in exchange for funds, making it easier to attract potential investors. However, this involves losing some control over your business in the process. The downside of using crowdfunding is that you miss out on the mentorship that comes with an angel investor, and funds are not collected until your target is reached ie it’s all or nothing.
Obtaining funds for your business has become easier than ever before. And if you need small business funding to help manage your cash flow or grow your business, contact Prospa about its small business loan.