Alternative Small Business Funding

As a small business, one of the hardest hurdles to overcome is financing. According to the Bureau of Labor Statistics, around one in five small businesses are closed within one year. Furthermore, only half survive five years. Unfortunately, financing and cash flow are two of the biggest problems.

Traditionally, one of the most popular options for financing is to visit a bank and go for a loan. For those with bad credit histories and other issues, this just isn’t an option. Thankfully, there are now options available for smaller entities and it’s referred to as ‘alternative funding’. At South Florida Funding Group, we’re experts in getting small businesses the support they need to not only survive but thrive into the future.

Why Choose Alternative Business Funding?

As a small business, you don’t want to take any unnecessary risks. In recent times, however, alternative finance options have come to be a more reliable source of finance than traditional bank loans. According to the Federal Reserve Bank of New York, small business owners spend an average of 25 hours completing the necessary paperwork for a bank loan. What’s more, they apply to three banks and there’s no guarantee that anything will come from this at the end.

On the other hand, business owners completing alternative funding forms only need to invest minutes of their time. Additionally, the sources of finances are available to those who have bad credit and can’t get a traditional bank loan.

If you haven’t yet tried a bank loan, you need to be aware that your personal credit history will go under the microscope. Since your small business has no history or track record, it’s often down to the owner to secure financing. With alternative funding sources, they’re more likely to assess the prospect of the business and projected future numbers.

For all these reasons, alternative funding has become a viable option for all new and existing business owners. Furthermore, owners normally don’t want to be tied down to a bank loan when they can secure an easier source through alternative funding.

Types of Alternative Funding for Small Businesses

Below, we’ve listed some of the options available to you as a small business. Whether you need finance for launch or are a couple of years in and need help for survival, you might find a source of alternative funding for you in this list.

Small Business Term Loans

Although similar to bank loans, the biggest difference with a business term loan is that…well, it doesn’t come from a bank. Instead, your funding will come from online lenders. Sometimes called medium-term loans, you’ll pay small amounts back each month. Depending on the terms of the loan, you’ll generally pay the whole lot back over between two and five years.

When it comes to alternative business funding, this is one of the most affordable solutions. This being said, they tend to be more expensive than bank loans and even SBA loans. This is often offset by the faster application process and the quick access to finance, but it’s still tricky to qualify for those with poor credit.

Small Business Merchant Cash Advance MCA

With this option, it’s possible to get fast cash when you need it most. Normally, this is actually the first thing people think of with alternative finance options because it was one of the original services. Although it has been overtaken by others, a merchant cash advance is still a suitable route in many situations.

If you haven’t seen this one before, you essentially get a cash advance on your sales. While you get the cash, you then pay back with a small percentage of future debit/credit card sales. For seasonal businesses, and those who know an upturn is around the corner, this is a good way to access fast cash and repay later.

Small Business Unsecured and Secured Business Loans

At South Florida Funding Group, we have lots of experience with secured and unsecured business loans. Ultimately, the one you choose depends on your circumstances and your willingness to risk certain assets. Here’s a breakdown of the two:

• Secured Business Loan - With this first option, the loan will be secured either by an asset that you own or an asset you’re going to buy with the money. For example, you can use the money to buy an office building and then secure a loan against this building.

• Unsecured Business Loan - An unsecured business loan doesn’t secure against an asset, but instead uses the credit of the business owner(s). Therefore, you’ll need a good credit score and a strong credit history to choose this option.

There are pros and cons to choosing both, and lenders will increase the interest rate when the risk is higher (i.e. for somebody with average credit).

Small business Equipment Loans

Typically, this loan is broken down into two different offerings too. With equipment leasing, you can rent important equipment for a monthly fee rather than paying outright. Of course, you won’t be the owner during this period. With equipment financing, you take a loan to cover the cost of a specific piece of equipment. The equipment provides security for the lender, and you become the owner of the equipment.

Small Business SBA Loans

Finally, we shouldn’t forget SBA loans since they’re designed specifically for small businesses. The Small Business Administration understands the troubles small businesses have securing finance, so they back a percentage of the loan themselves. Whether you’re looking to refinance debt, buy equipment, or just need cash, you get the money required and the lender gets the security of a partially backed loan from the government.

Work with South Florida Funding Group Today

When researching how to obtain alternative financing, reach out to the experts at South Florida Funding Group today. We can talk through your options and then decide on the best course of action for both the present and the future of the business. Our experience allows us to lead in this industry and we’d love to help you next!