Looking to raise funds for your business? While taking out a loan is the most common option, there are many other ways to access capital. Here are just five alternatives to a loan.
Open a business savings account
Savings could be one way of funding your next business move. With a business savings account, you can build interest on your contributions and work towards your savings goals more quickly. Saving up money is certainly not the quickest form of funding – it won’t help you in an emergency and it won’t help you with many expensive short-term goals. However, when you can afford to wait, savings can be the most rewarding form of funding as you won’t owe any money to anyone. You can compare the best Australian business savings accounts here at Finder.
Use a business credit card/line of credit
A credit card or a line of credit could be another option to consider. When it comes to many small expenses, you may not necessarily want to take out a loan. A business credit card or line of credit gives you access to capital that you can continuously dip into. Just like a loan, it’s important to remember that any money borrowed has to be paid back with interest. Always shop around for interest rates to get the best deal.
Consider invoice factoring
It’s possible that you may be owed money by clients. If you cannot call in these debts, an alternative option of accessing the money you’re owed could be invoice factoring. This is when a lender gives you money equal to that you are owed. It’s a great way of keeping your cashflow healthy. In many cases, you don’t have to pay back the money until your clients have paid the money that they owe you. Interest will usually be charged on top, so bear this in mind.
Issue shares in your business
If you’re looking to grow your business and you’re already fairly established, you could consider issuing shares in your company. This involves offering a slice of your future profits in exchange for funding. There are numerous different ways to seek out investment. You could get help from an investment bank such as Everblu Capital, which may be able to work as an intermediary between you and your potential investors. Alternatively, if you are less established, you could try getting help from venture capitalists who will finance you directly. In both cases, you should do your research into organizations, as well as having a solid business plan.
Use an angel investor
Another form of seeking investment is to use an angel investor. Unlike investment banks and venture capitalists, angel investors tend to be individuals that are able to directly offer funding in exchange for shares. Angel investors can be used to raise startup funds or capital to grow one’s business. You will have to pitch directly to these investors, which means having a good business plan in place to show that you are worth the investment.