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If you’re a small business owner or an established company, you probably know that to expand your operations or launch a new product, you could use more funding. More capital lets you pursue your passion, and it’s a key factor in making your small business expand quickly.
Due to a booming market for venture capital and private equity funds, alternative financing solutions such as Backd Business Funding offer small businesses the advantage of the same financial tools offered to large businesses by banks and other institutions.
What Are Alternative Financing Solutions for Small Businesses?
According to the Washington Post, startups seeking financing and established businesses seeking expansion can benefit from alternative financing solutions. These alternative financing solutions for small businesses include a variety of ways to get the money you need including:
Venture capital: Venture capitalists invest in startups, usually in exchange for an equity stake in the business. Venture capitalists are typically looking for companies with high growth potential and can make a lot of money down the road.
Angel investors: Angel investors provide funding for companies that aren’t quite ready to go public or get venture capital from institutional investors but are still promising enough to attract angel investors’ money. Angels invest in a wide range of companies, from app developers to high-tech startups, with the potential for high returns on investment.
Credit cards: Credit cards give small businesses access to short-term funding without having to pay interest on purchases until they’re paid off – but many businesses have trouble paying off their balances each month because credit cards are so easy to use unnecessarily (for example, buying lunch when the company cafeteria is nearby).
Bonds and debentures: Bonds are certificates of debt issued by cities, states, and corporations; they’re essentially loans that set dates and must be repaid at set interest rates. Debentures are similar instruments issued by private companies; they’re also called bonds or notes.
What Are the Biggest Challenges Small Businesses Have When Looking For Funding?
Small businesses are the backbone of the economy, but they don’t always get the respect they deserve.
“Small businesses are an important part of economic growth, but they’re also often overlooked,” says Xan Myburgh, CEO of Backd Business Funding. “Many people think that small business is synonymous with mom-and-pop shops, but there’s a lot more to it than that.”
According to a Washington post-publication, small businesses account for over half of all jobs in America and two-thirds of new job creation. They also generate about two-thirds of the U.S. gross domestic product (GDP). But many small businesses struggle to get funding from banks or other traditional sources, according to Dulaney.
“Regulatory restrictions make it hard for banks to offer loans to small and medium-sized businesses,” Myburgh says. “It is more common for them to offer large dollar amounts of loans to businesses. As a result, it’s difficult to obtain financing from banks.”
What Makes Backd Different
1. Quick loan approval turnaround times
Businesses occasionally require an immediate infusion of cash to fund salaries or unanticipated spikes in client demand. In business, things can get overwhelmingly unpredictable and unforgiving.
Because of lengthy credit checks, collateral requirements, and lengthy approval processes, it is often difficult to get funds quickly with traditional lenders. Backd provides a much quicker turnaround time without much paperwork upfront, so businesses can get the cash they need as quickly as possible.
2. Ability to provide flexible loans known as lines of credit that can be withdrawn whenever needed, as long as the credit limit offered isn’t exceeded. The funds that are drawn accumulate interest, usually at a variable rate.
A business line of credit is the ideal option for business owners looking to cover short-term priorities like payroll and equipment.
Once you need more capital for your project, you can draw against what has been previously issued without penalty. For example, if you receive $50,000 in funding from an alternative lender, you may only need $10,000 at first so there would be no penalty from drawing more than you need.
3. Bridging cash flow gaps with working capital
Another significant benefit is that you can bridge a cash flow gap with working capital. It’s faster and easier to qualify for this loan alternative than waiting for a traditional bank approval during a bad season or high overhead costs.
Serial entrepreneur and CEO Xan Myburgh began Backd to address a funding shortage for expanding companies. His company exists to finance other firms that cannot obtain conventional financing.