In the old days, bank business loans were the only means by which entrepreneurs and companies could raise money. But today, there are several alternatives to bank loans. People can obtain small business financing from fintech companies like Camino Financial that offer quick loans at flexible rates and minimal documentation even when you have no credit history.
The hassles of raising money from a bank
There are several issues associated with obtaining small business loans and other forms of funding from banks. Firstly, you must be a customer of the bank. Then, the banks will demand weighty collateral that will have far more financial value than the loan in question. Also, banks have a lengthy evaluation period before offering loans. They could spend weeks and even months evaluating your loan request before approving it.
Moreover, banks demand a lot of documentation. There might be many back and forth on validating documentation and getting you to produce more documents. You might be asked to provide very personal information like criminal records, educational information, tax returns, family address, and more. They might also have credit history requirements that are hard to meet up. And in the end, they will more often than not deny your loan application.
Modern Alternatives to Bank Business loans
The following are some alternatives to bank business financing that you must know about:
Fintech institutions are at the modern forefront of integrating technology with financial services. Fintechs, as they are popularly known, do a great job of meeting the business needs of several startups. They most likely offer the same benefits than old institutions, but with a better undertanding of the speed things should move in an hyper connected world.
Crowdfunding is the process of funding a project or business by raising little amounts of money from several people. Billions of dollars are raised every year for small businesses through crowdfunding.
Seed funding is how investors put money in a startup in exchange for equity stakes in the company. The seed helps to provide funding for the business till it can generate sustainable cash flow and stand on its own. The investors also offer mentorship, business connections, and other benefits to the business.
Venture capitalists are people or organizations that invest in startups or businesses typically deemed too risky for traditional banks or regular funding sources. Instead, they often receive an equity stake in the company in exchange for their funding. Venture capitalist firms continually invest in startups working on disruptive technology that have a considerable propensity for tremendous growth.
Small business grants
Small business grants come from private bodies and the government to provide funding for businesses that need it. The recipients of these grants will apply for them before going through a vetting process. Most of the time, the companies don’t have to pay the money back.
Business accelerator programs
Business accelerator programs are designed to rapidly expand small businesses by providing funding, mentorship, office spaces, infrastructure, networking, and other benefits they need. All these are provided in exchange for equity in the business.
Business credit cards
Credit cards provide a healthy source of funding for entrepreneurs that need cash at the moment. They help in times when the business is cash strapped. Some business credit cards can have limits of up to $10,000. It is a good source of short-term funding that you should repay within the interest-free period.
In this modern era, there are several alternatives to bank business financing. You do not have to go through the hassles of going to a bank to raise money. Use any of the other options mentioned above to get small business loans and other financial needs for your business.