How to Start and Finance Your Business!

Starting a business is an exciting journey that requires careful planning, dedication, and financial resources. Whether launching a new venture or expanding an existing business, securing the proper funding is essential for success. With various financing options available, it's crucial to understand which funding solution best aligns with your business needs. However, it's important to note that the lending market is constantly evolving, and what may be a reliable funding source today could change in the future. This guide will explore current reliable funding sources, the growing need for alternative lending, and the best financing options available for small businesses.

The Growing Need for Alternative Lending

Small businesses play a vital role in the global economy, accounting for approximately 70% of worldwide business activity. However, obtaining funding can be challenging due to limited credit history, lack of collateral, or difficulty attracting investors. As a result, alternative lending has become a crucial financing solution for many entrepreneurs.

Alternative lenders offer more flexible and accessible financing options than traditional banks, catering to businesses that may not qualify for conventional loans. With faster approval times, competitive rates, and diverse funding structures, alternative lending gives business owners more opportunities to grow and succeed.

Best Alternative Lending Options

If you're exploring alternative lending options, here are some of the best choices available:

• OnDeck – Offers short-term loans ranging from $5,000 to $250,000, with same-day funding options.
• Bluevine – Provides business lines of credit between $6,000 and $250,000 with quick access to funds.
• Taycor Financial – Specializes in equipment financing, with loans from $500 to $5,000,000 and 100% financing options.
• Fora Financial – An excellent option for business owners with bad credit, offering loans from $5,000 to $1,500,000.
• Fundbox – Provides startup loans up to $150,000 with fast approvals and flexible terms.
• National Funding – Offers fast business funding solutions ranging from $5,000 to $500,000.
• Camino Financial – Focuses on loans for immigrant business owners, offering funding from $10,000 to $50,000.
• Prosper – A peer-to-peer lending platform with loans ranging from $2,000 to $50,000.

Types of Alternative Business Loans

Understanding different types of alternative business loans can help you choose the right financing option. Here are some common types:

• Term Loans are lump-sum loans repaid over a fixed period with interest. They are suitable for significant business expenses, such as expansion or inventory purchases.
• Lines of Credit – A revolving credit option that allows businesses to withdraw funds as needed, similar to a credit card, offering flexibility for covering ongoing expenses.
• Equipment Financing – Explicitly designed for purchasing business equipment, this loan allows companies to acquire necessary tools, machinery, or vehicles while spreading out payments over time.
• Invoice Financing – Businesses can use unpaid invoices as collateral to receive an advance on their receivables, ensuring smooth cash flow.
• Merchant Cash Advances – A funding option where businesses receive a lump sum in exchange for a percentage of future sales, ideal for companies with high credit card transactions.
• Peer-to-Peer (P2P) Lending – Platforms like Prosper connect businesses directly with investors willing to fund their ventures.
• Crowdfunding – Raising funds from many individuals through online platforms, often in exchange for rewards or equity.

Traditional vs. Alternative Financing

When choosing between traditional and alternative financing, consider the following factors:

FeatureTraditional BanksAlternative Lenders

Approval Time Weeks to months Hours to days

Credit Requirements High Flexible

Loan Amounts High limits Varies by lender

Interest Rates Lower rates Competitive rates

Flexibility Less flexible Highly adaptable

Steps to Secure Funding for Your Business

1. Assess Your Financial Needs – Determine how much funding your business requires and how it will be used.
2. Review Your Credit Profile – Check your personal and business credit scores to understand your loan eligibility.
3. Explore Funding Options – Research traditional and alternative lending solutions to find the best fit.
4. Prepare a Strong Business Plan – Lenders often require a well-documented business plan outlining your goals, revenue model, and repayment strategy.
5. Gather Required Documents – Prepare financial statements, tax returns, and business records for loan applications.
6. Compare Lenders and Terms – Evaluate interest rates, repayment terms, and fees before choosing a lender.
7. Apply for Funding – Complete the application process with the chosen lender and provide the necessary documentation.
8. Use Funds Wisely – Allocate funds efficiently to grow and sustain your business.

Final Thoughts

Starting and financing a business requires careful planning and a strategic approach to securing funding. While traditional banks remain a viable option for some, alternative lending has opened new doors for entrepreneurs seeking fast and flexible financing solutions. By understanding your funding needs, exploring diverse lending options, and making informed decisions, you can empower yourself to build a successful business with strong financial backing.