With the capping of interest rates on the loans offered by the banks, the lending figures from the banks are in free fall. Most of the entrepreneurs are looking for various options to start new businesses and expand the existing business establishments. Secondly, when applying for loans from the bank some form of collateral is usually required depending on the amount of money that you are borrowing. This disqualifies a lot of people especially the small-scale business people since they do not have the financial muscles to guarantee some types of loans. Let us look at some of the creative ways of funding your business;
Creative ways of funding your business
If you want to establish a new business or you have been in business for the less than two years, you might be eligible for a type of loan that is referred to as the start-up loan. This loan is government backed and is intended to encourage as many people as possible to establish start-ups. This loan is only granted to individuals who exhibit that the cash they wish to borrow is designed for business. It is usually unsecured and repayable at a fixed interest of six percent.
The bank overdraft is ideal for the businesses that have fluctuating income. If you operate such a business, then the bank overdraft will provide you with a flexible and quick cash flow. The best approach to this creative way of funding your business is simple; secure the overdrafts during the months that you have less income and payback in the months that your business peaks.
Most of the banking institutions will only apply the interest on the overdrawn amount. They have lots of friendly packages that are meant to encourage the businesses to take up these offers.
Securing the cash advance is another creative way of funding your business. Various companies allow firms to receive cash before their invoices and debts have been paid. The financier is usually required to buy a fixed percentage of the future debit or credit card transactions at a given discount. He is then needed to advance the money into the bank account of the business; this typically takes ten working days. The repayments are then scheduled to be repaid as by the pre-agreed percentage.
Microfinancing is a great alternative to fund your business if you do not qualify for loans from the mainstream banking institutions. The microfinancing institutions offer insurance, savings, and loans to the small business owners and poor entrepreneurs who do not have security to secure loans. This a great avenue of financing your business since the interest rate charged is not as high as those that are charged by the banks. The payment plan is also flexible.
Asset finance is another creative way of funding your business. The asset finance-based loans have a similar model as the mortgage. If you need money to expand your business, you will borrow against an asset that you have. If you are not able to finance the loan, the asset will be repossessed. Some of the assets that can be used as security in this particular case include equipment. Inventory, accounts receivable, and property.