Small businesses are a key pillar for any economy. However, they often don’t have the resources to provide themselves with adequate financing options. With the right tools and knowledge about how to go about starting your own small business, you can avoid these pitfalls and learn how to use one of three financing options for small businesses in 2021.
Crowd Funding
Crowdfunding is a relatively new concept that has been growing in popularity over the past few years. It works as a way for small businesses and entrepreneurs to raise money from large groups of people, usually online. There are many different types of crowdfunding, with rewards based being the most popular. Backers receive different rewards in this type of campaign depending on how much they pledge to support it.
Crowdfunding is an excellent option for those with a great idea but either lack access to traditional financing options or doesn’t want to take on debt by borrowing money through a bank loan or other means.
Partner Financing
Partner financing can be a great way for small businesses to access money that traditional lenders might not offer them because of credit history or other factors. The best partner financier is one who specializes in funding small business loans and has established relationships with local banks and lending institutions that could provide additional funds if necessary.
Smaller companies may not be able to get loans from banks, but they can find other funding sources such as private investors or venture capitalists. These partners might provide capital in exchange for equity stakes in the company, which means they’ll share profits and losses with the company.
Invoice Financing or Factoring
Invoice financing, also known as factoring, is a great way to help small businesses get the cash they need without taking out a traditional loan. If your company has trouble getting paid on time, invoice financing may be an option. Invoice financing is when a third-party purchases invoices at discounted rates to get the payment faster than if it were to go through the traditional process. It’s basically like having money wired directly into your bank account within 24 hours.
Final Word
The small business financing landscape is changing. Traditional sources of capital are becoming more difficult to access, and new ones are emerging. If you’re looking for a way to grow your company, keep an eye out for these three options in 2021.
