How do you finaCredit: morguefile.comnce business growths without banks? The bank tends to be the first place we think of when we need a loan, but for many small businesses, it can be hard to get a loan for startup or even for expansion.
Many banks will ask for a business plan, which is a good idea to have for yourself, so you know where you are and where you are going, but the one they are looking for, will involve detailed financial projections and expectations.
For many people especially a small business owner, this can be the hardest part of funding their company or growing it larger.
Banks have their place, and can be a great place to start if you are showing positive cash flow and a good solid plan for the future. You can take advantage of this time to setup lines of credit for those days when things are not going that well or you are in a cash crunch. So, if you are lucky enough to have your business in this position, then take advantage and setup up a line of credit now.
It is much easier to get approval from your bank if you are in a good position now. So, even if your business is doing well, it would be a great time to apply for any credit you may need in the future.
Low Interest Credit Cards - If you feel really strongly about the growth of your business, then you may want to consider applying for a low interest credit card that allows cash advances for the same low rate. If you run a corporation then you could try applying for it under the company name, but most likely you will have to apply for it under your own name and lend the money to the business.
This does put you in the position of having debt, but if you feel strongly about your business, then you can setup a payment plan that your business will have to follow to use this money.
Family and Friends - This can be a bit tricky for many small business owners, but if setup properly as an "official loan" this can work out well. Create a plan and explain why you need the money and what you plan on doing with it. Show your growth ideas, and basically sell the idea of your business.
Hold a meeting at your place of business with your family and friends, or arrange a gathering so you can explain why you are looking for investors right now. Find out what interest rates the banks are charging for loans and add a percentage point to this to sweeten the deal with family or friends.
Make it look like a good investment. You can then work out the length of time you will need to pay back this loan. The biggest mistake you can make with family and friends, is not oulining the details of the loan.
If you simply tell them "I will pay it back when the company starts raking in money" and then they see you driving around in a new car or nicer clothes, or see you spending money and they are not getting theirs, this will cause resentment.
If you set it up right from the beginning with the higher interest and a payment plan of "X" number of months or years, then it doesn't matter what you spend your own money on, as long as you make the agreed payment every month to them, they will not be following you around wondering what you are spending your money on. Credit: morguefile.com
Set up a good payment plan in writing. You can get principal and interest charts off the internet and then work out a payment plan that you both will like and that you can work with, and then do it in writing and both of you sign it.
As long as you stick to this payment plan, you will get the loan, and they will enjoy a better return on their money than they would get in the bank. Make sure you make the payments, the last people you want to upset is family and friends!
Lease - If you wish to grow your business by adding new or better equipment, then consider leasing it. Many equipment sales companies will have options to buy or lease. It can be easier on a small business with limited cash resources to lease a piece of equipment. You could consider a "lease to own" option that may work out best for you.
Lease payments over a long term will not affect your cash flow as much as a large purchases will. So, before you try and find funding for equipment, check out the idea of leasing. This way at the end of the lease, you may have an option to purchase, or upgrade which can be better for growth.
Suppliers - If you have a good rapport with your suppliers, you can apply to get the limit raised or apply to go a longer term on the bills you get from them. Some supplies will allow you to go 90 days if you are in good standing with them. This could get you through a cash crunch but still get your product out the door.
Raise the Limit On Your Credit Card - This would be used as a last case scenario. You will need to feel very strongly that your business will benefit and grow. If you are in good standing with your credit card, and the interest rate is reasonable, then consider calling them and asking for the limit to be raised so you can take a low interest cash advance.
If you go this route, take the time right away to set up a payment plan to get this extra balance paid down as quickly as possible.
Financing business growths without banks, can be done. It may take some creativity, but as a small business ower, this is "your baby" and you want it to thrive, so if you are not a fan of the bank, there are other options out there!