Alternative Business Financing Methods Gaining in Popularity

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The growing economy and the increase in purchasing power are providing perfect opportunities for new and existing businesses to grow. There are more businesses established in various industries than there were last year, signaling steady growth. Existing businesses are also expanding to new markets and boosting their production capacity.

Naturally, there are challenges associated with starting a new business or expanding an existing one. According to recent reports, finding a reliable source of financing is still considered the biggest challenge of them all. Fortunately, there are more alternative financing options on the market too and businesses are turning to these solutions more frequently.

Project-Based Financing

One of the most popular financing options available for businesses is project-based financing. Instead of taking out a long-term loan with annual interest, some businesses now prefer short-term loans. There are a number of reasons why short-term, project-based loans are more popular today.

For starters, short-term loans are more manageable. The cost of using this financing option is calculated based on the duration of the loan. This means businesses know exactly how much they have to repay even before taking out the loan.

These short-term loans are also very flexible. Businesses can now use a suitable loan for as little as 3 months, eliminating the need for long-term loans entirely in some cases. The maximum principal amount is also relatively high, up to $250,000 depending on several factors.

To make it even better, finding a suitable short-term loan is easier than ever thanks to online resource centers such as Fundera. Fundera grants access to a wide variety of loans designed for businesses. Business can simply define a specific set of search parameters and get quotes from multiple lenders – and different types of loans – in just a few seconds.

Crowdfunding and Invoice Financing

Crowdfunding is another type of financing that is commonly used by businesses today. The immense popularity of crowdfunding has made it a go-to solution for startups trying to take ideas into tangible products. It is also easier to find sources of crowdfunding and connect with stakeholders directly thanks to platforms such as Kickstarter.

Crowdfunding is a great financing option for new and exciting products. As long as the business can generate enough buzz around the product or campaign they are launching, hitting the crowdfunding target should not be a problem. For expansions, dealing with increase in demand and other purposes, however, invoice financing is the better solution.

As the name suggests, invoice financing is the type of financing that uses an upcoming invoice as collateral. The loan amount can be as high as 80% of the billed amount. In most cases, invoice financing can help small and medium businesses deal with large orders and increase their production capacity with little to no extra risk.

A Growing Market

The availability of more financing options for businesses means the current market growth is more sustainable than ever. Experts believe that we will continue to see an average growth of 5%, with some industries enjoying even faster growth that the rest.

We will also see a huge increase in the use of internet marketing and online commerce fueling this growth. Small and local businesses can now reach customers from different parts of the country – and even from other countries – and gain an even bigger increase in demand for their products.

All of these positive signs remain strong despite the recent changes and minor market uncertainties brought by the current administration. If you are thinking about expanding your business or starting a new company, there is no shortage of opportunities to grab in today’s economy. You also have the financing options to support expansions at a much lower rate.

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Boris Dzhingarov is a business writer who investigates issues to craft great stories that readers love.