Five Ways to Raise Money in a Down Economy
In a spiraling economy lenders are becoming increasingly conservative with lines of credit. Financing a new business and raising capital can create dilemmas not easily solved through traditional bank loans – but there are alternatives for today’s business pioneers.
The following are five avenues a business can use to raise money in a down economy:
Seeking a Micro Loan - Small business finance has been given new hope with the micro loan. A traditional bank can reject entrepreneurs with even reasonably good credit. This is not the case with micro lenders who are more willing to focus on the individual circumstances affecting a credit score. Some micro loan funds actually require submission of a turn-down-letter from a bank in order to consider applicants for credit lines reaching up to $50,000.00.
Using your Assets – In this climate of perceived risk and protecting the bottom line, asset-based lending has leaped forward. Small businesses lacking credit-worthiness can secure a loan against eligible receivables, where 85 percent of the total loan is fronted by the lender. The remaining 15 percent is forwarded after your customer pays in full. Nearly 1.5 to 3 percent will be paid over prime for the advance.
Turning to the Web – Peer-to-peer lending is a relatively new concept marrying borrowers and lenders online. This creative solution to raising money allows borrowers to search for lenders willing to loan up to $25,000.00 in exchange for a small amount of working capital. Prosper.com, LendingClub.com and Loanio.com are three examples of web-site lenders offering a standard three year term. Rates will vary widely.
Going around the Big Banks – Research local banks to find business-friendly lenders willing to work with profitable businesses. Good credit ratings are necessary, and a clean balance sheet with realistic profit and loss statements, are very attractive to these business financing professionals. Many of these smaller banks lend to manufacturers and distributors, basing lines of credit on receivables and inventory.
Sweet-talking your Vendors – Vendors are uniquely motivated to keep their customer’s businesses operating successfully, and willingly structure payments to aid them during a rocky period. Often over-looked as a source of credit, companies can receive favorable terms from their manufacturers – easing their cash-flow burden. Vendors will willingly take chances when profitability is proven – customary banks tend to shy away from profit-based capital and forecasts.
America’s ever-evolving technologies and entrepreneurial zeal, continue to create money-flow solutions for businesses willing to push financing boundaries. Our pioneer spirit is alive and well - and constantly evolving towards a brighter future.
Ava Cordell is a freelance writer with a passion for the written and spoken word. A professional actress and singer who is also a dedicated mom of 4; Ava has no problem seeing the drama and humor in everyday ordinary events, and thoroughly enjoys the descriptive.
Ava has a unique gift in penetrating through "spin" and disingenuousness – the honest motivations behind American business are worthy of comparison to government expansion. A passion for politics and a loyalty to free enterprise fuel her desire to write provocatively for the American business entrepreneur.
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