Capital is the lifeline of business ideas. Access to capital can elevate your entrepreneurial vision from a business plan on paper to a thriving enterprise. But many born entrepreneurs will confess that accessing funding can be a living nightmare. That’s why we’re delighted to share proven tips for choosing the right financing option to grow your business.
We’ll explore options from bootstrapping, conventional funding sources, alternative financing options, and unique funding options like ITIN loans that target immigrants who may be ineligible for a Social Security Number.
Let’s wade in.
Is It Essential To Look For Financing Alternatives For A Business?
Entrepreneurs typically access financing to start or grow their business from either debt or equity. Equity financing involves players willing to invest in the industry and exchange for ownership of a portion of the company.
On the other hand, debt financing involves accessing financing from institutions that expect repayment of the principal plus interest in a prescribed manner.
Alternative Financing involves seeking financing for your business outside the conventional channels such as traditional banks. For some business entrepreneurs, alternative financing is the only viable option, thanks to barriers in the formal lending system.
Here are some main hurdles to accessing conventional financing that make it necessary to look for alternative funding.
- Businesses that present peculiar funding needs excluding in the lending policies of traditional lending institutions
- Stringent eligibility requirements disqualify some businesses from applying for funding. Such criteria include the need for collateral, credit history, a good credit score, trading history, and documentation that may bar special groups like immigrants who may want to do business.
- Revolutionary business ideas may be too risky for traditional lenders to handle, especially in fast-evolving digital technologies.
- Businesses that may need instant access to funding often opt for non-bank funding options.
Three Financing Options For Your Company.
Businesses need to be aware of the various funding options available to start and expand their businesses. We’ll classify these funding sources into three main categories. That said, you can employ a hybrid approach where you incorporate a mix of various funding sources that are most suitable for your business need.
1. Bootstrapping or self-financing
It involves seeking financing from family and friends and digging deep into your savings to kickstart your entrepreneurial venture. Bootstrapping is advisable when you start a business as it helps you embrace austerity and limit external funding during your business’s early stages.
2. Traditional bank loans
Traditional bank loans may come as long-term or short-term loans and are a cost-effective way of raising financing for your business. The benefit of bank loans is that you retain ownership of your business. Besides, you can build up your credit history and enjoy tax deductions.
Examples of loans your business can apply for:
- Business term loans
- Government-backed SBA loans
- Equipment loans
- Real estate loans
- Lines of credit
3. Alternative financing sources
Alternative financing is accessing funding from non-bank sources. You’ll likely find a host of these alternative financing sources online. If you’re struggling to get approval for your loan request from traditional lenders, here are the other options you can try:
- Business grants; Includes Federal grants, Small Business Innovation Research Program (SBIR), Small Business Technology Transfer Program (STTR), Corporate grants. Check out www.grants.gov for available grants
- Fintech lenders such as Kabbage, Camino Financial, and Paypal.
- Venture Capital and Angel Investors; Google Ventures
- Peer-to-peer lending
If You Are A Foreigner And Do Not Have A Social Security Number, ITIN Loans Are The Best Alternative For You.
Accessing financing is even more challenging when you’re a foreigner who doesn’t have Social Security Number. But the good news is that with an ITIN number, you can apply for and get ITIN loans to grow your business.
Here’s what you need to do to get an ITIN loan.
- First, you need to register for an ITIN Number.
- Then, get your business registered as a DBA (Doing Business As) if you haven’t yet done so.
- Proceed to open a business bank account
- Compare the terms of various lenders who offer ITIN loans.
- If you qualify for the loan, then apply for an ITIN loan online
- Repay the loans as per the borrowing terms
Business owners must explore various financing options to boost their businesses. Examine the multiple funding options and reach out to lenders to grow your business.