24-11-2008

With the credit market being tight, many small businesses are having trouble getting loans to give them the cash flow necessary to stay afloat.

ConsumerAffairs.com describes a number of alternatives to small business loans, although each has its own restrictions and conditions.

"Securities-based lending" is an inexpensive way to borrow money from yourself if you have money in an investment account. With some financial service companies you can borrow using those securities as collateral.

"Friendly capital" is another option, which means borrowing from friends and family who believe in you and your business. The key to this method is to have clear expectations on the loan and an understanding there may never be repayment.

"Trade credit" lets you provide goods or services to another company on credit. This could give you extra days on your accounts payable.

"Royalty financing" is a way to borrow with repayment tied to revenue your business generates. It is critical here to watch the terms of the royalties.

"Factoring" lets you use your accounts receivable as a funding source. Factoring doesn't create any additional debt for business owners, but factors may change a high interest rate.

"Peer-to-peer lending," which can be done through a variety of web sites, arrange for loans between those who need money and those who want money but want better returns than a money market or savings account would provide.

"Hedge funds" are another choice, but this would require offering equity in your business in exchange for the money.

ConsumerAffairs.com also indicates some local community banks are still making loans and offering credit lines.

Credit cards are also an option for funding, but business owners need to be careful about their ability to make payments.

The report on ConsumerAffairs.com suggests small business owners should talk to accountants, financial advisors, and lawyers about needs and options.

Source:http://www.abc15.com/content/news/investigators/