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Five Ways to Access Extra Capital for Your Small Business

By Katrina Manning

Whether you’re running a startup or an established small business, it seems to be harder than ever to access capital from banks. But even if a financial institution says “no” to your request for a business loan, that shouldn’t stop you from pursuing your goals. There are funds out there, you just need to know where to look.

Instead of focusing on traditional funding sources, here are five ways to access extra capital for your small business that you may not have considered.

Small Business Grants

Often this form of capital gets overlooked, but it deserves more attention. The government occasionally offer grants for businesses that fit initiatives they are trying to promote. Although it can be exhausting trying to access federal funds, you never know what you might get unless you try. Visit business.usa.gov to get started, and consider hiring a grant writer to help you with the application process. don’t forget to look for less obvious grants. For example, Fundera’s Zach Grant provides a $2,500 check each year – all you need to do is submit a video explaining why you started your business.

Credit Cards

This might not be your first option, but credit cards can help you get through a financial bind. According to one SBA study, nearly 60% of business owners use credit cards to meet their organizations’ capital needs. Of course, the only way to continue having access to that credit is to make regular, timely payments, and prevent your debt from ballooning out of control. If managed correctly, credit cards can help build your business credit score, which can make you eligible for lower-cost capital in the future.

Yet, this can also be a risky situation. If you ever have trouble paying off balances on your credit card, then it may put you in an even bigger hole. You might increase your financial debts and ruin your business credit score. Having bad credit means that future lenders may think twice before giving you a loan. If you do go the credit card route, pick a card with a fair interest rate. Also, make sure you have a plan in place to stay on top of payments. Some credit cards hike up their interest rates if you are even one day late.

Factoring

Many business owners don’t know that there is a financing method available that provides advances on future revenue: invoice factoring. This may help ease the growing pains that come along for small businesses. Essentially, the factoring company will give you money upfront for invoices that have already been sent out. If your customer has not yet paid their bills but you need the money now, factoring is a strategy you should consider.

You settle your debt with the company once your client pays their invoice. This means you have a shorter gap between billed work and getting payments out to suppliers. As any business owner knows, there are months when things go a bit more slowly, but you still have employees to pay. Some customers wait until the last minute to pay their bills. With factoring, you have another option.

Online Lenders / Alternative Lenders

At the 2015 LendIt conference, U.S. Treasury Secretary Larry Summers said he expects online lenders to soon reach over 70% of small businesses. What makes these alternative lenders different is their speed — you can get funded in days, not weeks or months — and their customized loan sizes.

To access capital from an alternative lending company, you will need to show and prove your monthly cash flow, as some lenders have annual revenue requirements of $100,000 or more. The good news is that the application process can be completed in less than an hour, and the paperwork requirements are far less than a traditional bank loan.

Open a Side Business

It may seem counter-intuitive to open another business when you need funding, but this might be just the thing to help get the bills paid. When you’re first starting out, you will need money and possibly lots of it. Your side business can be used to directly funnel money into your dream business. Moreover, you don’t have to worry about looking for investors or applying for a loan. If you have bad credit, this might be your only choice outside of asking friends and family for money — not an ideal situation if you can’t pay them back.

Instead, look for a profitable side business that you can do from home. One small business owner bought used iPhones and resold them. He did have to spend time inspecting each phone, but made around $100 per phone sold. If you’re waiting for purchase orders or pricing sheets, you can use the eFax mobile app to send and receive faxes from your smartphone. Think of something that won’t take too much time away from your main business, but will give you cash in hand.

Opening your capital sources to alternative avenues will give you a better sense of control over your business. Instead of giving up when the bank turns you down, try to determine other routes of getting the money you need. By doing so, you might be able to expand your business beyond your wildest dreams.

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Katrina Manning is a professional writer/editor with over seven years’ experience penning content for a variety of sites like Yahoo! Small Business Advisor, IBM, Business 2 Community, Udemy — just to name a few. She is the current Content Director of BuildNicheLinks, a recognized link building company in Houston, Texas. Follow her on twitter @kcinnaroll.