It is not always possible to borrow money from a relative, friend, or colleague to put up a business or to address an unexpected business expense. Small entrepreneurs and business owners are likely to encounter this kind of a financial dilemma especially when they are just starting out. Securing the right alternative financing can spell the difference between survival and failure. Turning to conventional business lending might not be the best option. Most of these financing instruments are quite prohibitive in terms of cost and are often harsh in terms of penalties. As there is a clear demand for more reasonable lending facilities, some finance companies have come up with alternative financing methods to help small entrepreneurs.
Microlending is one of the more popular methods that target those who are in need of small amounts of additional capital or funding. The interest rates are lower and the repayments are more manageable since the loan amount is limited. These lending terms are more reasonable for businesses that do not really need millions in borrowed money.
Another financing scheme that is rising in popularity is revenue based financing or RBF. This also has a lower borrowing cap than traditional financing. The repayment is determined based on the borrower’s monthly revenues. As such, businesses are not unduly burdened with loan repayments that their revenues cannot accommodate just yet. This is especially helpful for those businesses that take time before considerable income is generated.
There are also those that offer short-term collateral-free loans. These loans do not put the business’ assets or any other properties of the business owner on the line. It basically works like a payday loan for businesses. When the expected cash flow comes in, the company can repay the lender.
With these alternative financing methods becoming more and more mainstream, entrepreneurs are able to get the occasional boost that they need to achieve business growth. They no longer have to compromise their business sustainability with high interest business loans. Entrepreneurs and business owners who wish to take advantage of these methods of gaining capital can check if their local business resource centers and specialized lenders can give them more reasonable options.
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