Sources of fresh capital – other than banks!

Given the recent Royal Commission into the banking sector and their lending practices, using banks, as a primary source of funding and capital, may indeed become a challenge for some businesses.

In the wash up post the Royal Commission, as part of their reconstruction, it’s highly likely banks will tighten up lending practices.

For businesses that rely on fresh funding to fuel their ideas and growth, other financing options will need to be considered if they are to survive.

While bank loans and lines of credit have been the default option for many businesses, there are other avenues to explore – however, not all will be applicable – it will depend very much on; the risk profile of the business owner, the business itself and where is sits in terms of maturity.

Here are some of the more common sources of funding (finance), other than banks.

Friends & Family

Often overlooked, this is probably the quickest and possibly the easiest source of funds.

However, remember that just because they are your family or friends, that does not mean you can be wishy-washy with your business idea or more specifically, why and what you’ll be using the money for.

Having a clear business plan, focused on a strategy, implementation plan and outcomes will not only help you – yet also provides your potential ‘investor’ with confidence that you’ve thought this through.

This is where your communication and marketing skills come into play.

The primary benefit of family/friends funding is that of a very low interest rate (or potentially none at all).

So, while this could potentially be a very cheap and easy source of funding – there is the chance that your family/friend investor may want a share of the business.

Government Grants

If your business or business idea is researched oriented, then Government Grants may be the way to go.

The Government is actively encouraging innovative business ideas as well as those businesses that have a benefit for the environment.

However, the business should be related to a problem-solving activity.

The idea should also have high commercialisation potential to get funded.

The good thing about grants is that they are absolutely free and you don't need to repay anything back to the government.

Business Credit Cards

Many businesses these days borrow money on their personal and business credit cards in order to finance their businesses.

If using this method, however, you should be careful not to default in payments since the interest rates and cost on the cards build up very quickly.

Online Lending

The Internet has not only made doing business very easy – yet also provided a spring board for business services – including online lending.

For example, online based lenders such as Prospa and Shift are viable alternatives to traditional banks or other microfinance institutions.

This is because they are easy to deal with, fast and reliable. The timing of the loan takes less than a day and this can be crucial for small businesses at times!

Additionally, financing is typically non-secured, meaning you don’t need to offer up some form of collateral to secure the money.

If you are in the market for fresh financing or are looking at alternative sources, then speak with Aperture Accounting today. We will help you to choose the best course of action for your business and situation.

To find out more, call Aperture Accounting on 1300 273 788