There are many alternative funding options for entrepreneurs to grow the operations of the business. Where does one go to get the funds needed to grow the business?
Who lends money to small businesses? Is there an alternative to bank financing? In fact, an entrepreneur can get funding several ways for growth.
Alternative Funding and Typical Funding Options
There are various options for entrepreneurs to get funding. Typical funding involves government grants and loans, business loans, loans against inventory and receivable purchases.
A grant is actually FREE money from the government to help grow your business. There are certain government programs that allow business owners to grow your business.
For example, the Government of Canada has a program called SRED. Scientific Research and Experimental Development is a program that allows entrepreneurs to receive funding for conducting research in Canada.
This program available to all companies regardless of size.
I have spoken to many accountants in Newmarket, who have used SRED to help clients get money for scientific research. The consensus is the program does work and companies have to apply for it.
The government does have some strict rules that entrepreneurs have to be aware of, though. Entrepreneurs must be aware of the rules otherwise, they won’t get the funding.
Loans against Inventory
This is another alternative funding source to traditional financing. Fred Flintstone owns a widget manufacturing company.
Fred’s company is growing at a phenomenal rate that he does not have the money to keep up with the demand. What is Fred to do?
Fred went to his local bank where his situation did not fit the ‘model’ the bank has for lending money. Frustrated, Fred calls me up and asks me what he could do?
I call up a few of my networking contacts that are accountants in Newmarket and received the name of a company that makes loans against inventory.
After a few phone calls, a meeting was set up and now Fred is doing better than ever.
Loans against Receivables
Sometimes a company will have money that is owed to them but may need cash flow to finance an expansion plan. That means the company has money owed to it but will not receive payment for say 60 days.
In the meantime, suppliers have to paid and so do the staff.
There are companies which will loan money against the receivables for a nominal fee. In exchange, the company gets cash for the outstanding money owed to it and is able to carry on.
Why Don’t Entrepreneurs Use These Funding Sources
Entrepreneurs are very busy people and are generally unaware of the different tools that can help them grow. When I talk with other bookkeepers in the GTA at networking events, I
hear similar stories of clients that use alternative financing and it gets them over that hump. It really works; however, the entrepreneur should be aware of the cost of obtaining such financing.
It costs more than traditional financing; however, it will get your business to the next level.
Alternative funding options are not for everyone. It does cost more than traditional financing; however, it is another option available to entrepreneurs who need it.
There are countless examples of entrepreneurs who would have gone out of business if it were not for the alternative financing methods.