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Nine Unconventional Sources for Small Business Financing

Getting your small business off the ground requires a lot of hard work, measurable talent, and even a little bit of luck. It also, more often than not, requires funding. Even if you’re a sole proprietor starting a service business, you could really take advantage of some startup cash to get your marketing message out and start drumming up business quickly.

Yet, conventional sources of financing – such as small business loans – aren’t always an option. Some folks won’t qualify for this kind of funding, and may need to seek funding via other means.

Here are a few unconventional sources you might consider to get your small business up and running:

  1. Kickstarter. In the past few months, Kickstarter.com has emerged as a tremendous new tool to help new businesses get startup funding. With Kickstarter, you offer investors something in exchange for their investment. In many cases, this is something from the product or product line that you’re creating. You might have a Kickstarter campaign to write a new novel, and for a $25 pledge donors will get an autographed copy. For a $50 pledge, they’ll get two copies. For a $200 pledge, you’ll name one of the peripheral characters in the novel after them, etc. One recent Kickstarter campaign garnered more than $3 million in startup money.
  2. Microloans. Microlending is growing in popularity. These loans are smaller in value than, for example, traditional Small Business Association loans. You might turn to this kind of loan if you don’t qualify for corporate credit, or if the business that you want to start is in a high-risk field. Microloans usually come from financial institutions in the community. They usually have specific requirements in terms of your credit history, and they will have a dollar limit that’s usually less than $10,000.
  3. Peer-to-peer lending. This is similar to, and often overlaps with microloans. Whereas microloans come from banks or other financial institutions, these lending agreements take place between individuals or between multiple businesses. There are a number of websites that help to facilitate peer-to-peer lending, and often have certain requirements in terms of a written business plan, creditworthiness, and more. These types of loans can be for any amount, although loans under the $10,000 mark are the most common.
  4. Specialized government or private grants. There are grants available out there to start up many different types of businesses. Some are more well known, such as grants that encourage the starting of women-owned or minority-owned businesses. Others aren’t as popular, and have to do with specific types of technologies or particular industries.
  5. Your retirement fund. There are many other sources you should consider looking into before you dip into a retirement fund, of course. Generally, you’re looking at a significant tax penalty, to say nothing of the fact that you may lose it altogether. That said, when you don’t have any other sources for funding, this can be a viable way to get startup cash.
  6. Advanced commitments for deliverables. Depending on the product or service your business offers, you may be able to get advance payments for various deliverables. This applies to certain contract businesses where you need to invest a good bit of money in raw materials, for example.
  7. Friends and family. In most cases, money and friendship don’t mix terribly well. Yet, if you have a truly good business idea, a stellar business plan, and the motivation to make it happen, you may have family or friends who are willing to help fund your business. Tread lightly here, of course; a business deal gone bad has spoiled more than one family relationship over the years.
  8. Home equity loans or lines of credit. It’s not unheard of for a small business entrepreneur to mortgage their home to help get a business started. It’s not always the smartest move, but sometimes you don’t have any other options. You’d better be convinced that your business will work, of course, or you risk losing the home.
  9. Credit cards. Not a good choice, but a viable one in some circumstances. If all you need is a couple grand and can’t get it anywhere else, consider using plastic. Just be sure to make actual purchases, as cash advances will cost you huge in fees and interest charges.

If you’re trying to get your business off the ground, consider one or more of these unconventional financing sources today.

 

Greg Muender is President of Ticket Kick, a California company that helps drivers get speeding tickets, red light tickets, and other traffic tickets dismissed. The company, which formally launched in 2010, has been helping drivers avoid speeding fines and the other hassles of getting a ticket since 2006 and is the leading company in this industry.