3 Alternative Financing Solutions for Small Businesses

Financial management is key for all businesses, especially SMEs. With fewer employees than a large company, smaller business owners often feel more pressure to keep their staff happy.

Unlike a big enterprise, there aren’t as many skilled workers to rely on. Should one leave, it could massively impact the running of the company.

One way to guarantee loyalty from your workforce is paying them on time. To achieve this, you’ll need to stay financially afloat. However, sometimes the traditional methods can be ineffective. Here are some fresh ideas to help you achieve this goal.

Invoice Discounting

Ever heard of invoice factoring? It is a form of invoice financing which involves a financier implementing credit control services on your behalf after you have raised a debtor invoice. Well, invoice discounting is similar.

Read more about alternative financing

With this method—just like factoring—your financier provides you a prepayment percentage of the value of the invoice. After the debt’s been paid, you’ll then be given the remaining worth, minus the prearranged fees.  The main difference however is that you remain in charge of your credit control and activities such as chasing payment from your debtors.

Along with providing consistent cash flow support for your business, it may mean that you will be able to ensure that motivation remains consistent amongst your customers and staff.

Merchant Cash Advance

A Merchant Cash Advance (MCA) is another funding option. So long as your company’s income is steady—and you can prove this—it can be a business finance solution.

Once financial consistency has been confirmed—usually 6 months of historic customer debit/credit card sales will do—your merchant finance provider of choice will deliver an advance. In exchange for this line of credit, they’ll receive a percentage of your customers’ credit card transactions.

Crowdfunding

If you’re just starting up with your business, crowdfunding can be ideal. In essence, it describes a collective investment from multiple people—the ‘crowd’—towards a project. For investment-based crowdfunding, in return the investors normally receive shares.

Taking this route, you can gain the money you need to help your business thrive. In addition, you’ll already have established a strong network of support from its shareholders.

Interested investors may even exhibit valuable skills, like social outreach or business strategy expertise. If so, why not seize this opportunity to utilize their talents? That way, you can make the most of your business network.

If you’re still building up your enterprise, this route could lead you to valuable funding for growth.

In an ever-changing world with more complex financial instruments and technology-based funding platforms, traditional financial solutions can prove ineffective. But these alternative methods may provide a new, more reliable response to your money questions. As a result, they could help you to ensure that your business not only stays afloat—but thrives.