Is cash flow a concern? Have you lost sleep worrying about how to afford new hires, update your systems or pay for stock?
You’re not alone. Finance can be notoriously inaccessible for small business owners and entrepreneurs looking to grow or expand their businesses.
If you’ve ever asked for a loan from your bank, you would understand the struggle. It can be a tedious and time-consuming process and more often than not, the bank will say no, leaving you at square one.
But the game is changing. The fintech lending market has exploded in Australia leaving small business owners with more choice, opportunity and access than ever. Equally, startup investment is out there, you just need to know where to look. Here are seven ways to fund a business without visiting a bank:
1. Alternative lenders
The small business online lending market has exploded in Australia and across the world. Online lenders have grown about 175 per cent a year, compared to a decline of about three per cent in the traditional banking sector.
Alternative lenders are a great option for small business owners who have been denied finance by a traditional finance provider. They are more willing to lend to small business and in most cases don’t require personal security to issue a loan. These small business loans are best suited to SMEs who have been operating for more than one year.
Online lending platforms such as Spotcap have developed unique credit algorithms which leverage real-time business data to provide unsecured lines of credit in a fast and flexible way. The application process can be completed online and funds are made available within 24 hours of approval.
2. Credit Unions
A credit union is a cooperative, non-profit institution with several economic deposit funds in a member-owned space. It is lending by entrepreneurs for entrepreneurs, comparable to a small bank. Members of a credit union formulate policies, elect the board and are joint owners.
A credit union promotes solidarity between lenders and borrowers and sometimes serves customers just as a bank would. A credit union depends to a very large extent on communication and trust, each participant has an interest in making the union successful so interests are fully aligned.
3. Government support
Although government grants have a reputation for being difficult to obtain, there are a number available to Australian SMEs and entrepreneurs. The Australian Government provides up to six million dollars of funding through the Small Business Award alone. The states and territories also support small business with unique programs; The Victorian Government Technology Innovation Fund is a good option if your business solves a community problem and the WA Government runs the Innovator of the Year program.
Online crowdfunding platforms are cropping up all over the world. These platforms provide entrepreneurs with the opportunity to connect to thousands of potential investors in the form of loans, shares or even a donation. Crowdfunding is the ultimate test of whether the public believes enough in a product to invest in it. However, these campaigns can take a great deal of preparation and time to execute.
5. Angel investors
Angel investors often help businesses in the early stages of growth for a piece of equity. Most of these informal, mainly private, investors are entrepreneurs themselves and invest a portion of their own private capital into companies they are connected with or where they see potential.
Besides funding, they often bring years of knowledge and experience to the table along with industry connections. Historically you would find these angels by good old-fashioned networking, today they can be found online through associations and groups.
6. Startup incubators
An incubator is a support infrastructure which comes equipped with resources specifically for startup companies in exchange for equity. Sometimes called accelerators, these organisations are developed to give new businesses the opportunity to advance as fast as possible by providing the mentorship and resources needed. Globally there are around 7,000 incubators with 430 located right here in Australia.
7. Friends with deep pockets
Easy and fast, little paperwork, and inexpensive, these loans come from the people who know you best, they know how hard you work and what they are investing in. In order to keep things professional, it is important to make clear agreements and lay out all conditions officially beforehand.
If you’ve had a bad experience with a bank, don’t be disheartened, there are now plenty of options available, depending on your needs and what stage of business growth you are at.
About Lachlan Heussler
Lachlan is the Managing Director of Spotcap Australia and has more than 15 years’ experience in financial services, both in Sydney and New York. He has witnessed the profound impact technology can have on financial services and is passionate about using technology to support Australian small businesses.
About Spotcap Australia
Spotcap enables small business owners who have been operating for more than one year to grow their business by providing fast and flexible financing. The company has developed a sophisticated and dynamic credit decisioning process assessing the real-time performance of businesses to grant short term business credit lines and loans.