Alternative Business Funding
Alternative Business Funding options are available for business and commercial purposes. Alternative Business Funding simply means you are not dealing with a traditional bank. This type of funding can be obtained from private parties who are also known as alternative business lenders, hard money lenders, private equity investors, investment groups, or venture capitalists.
Alternative business lenders make up the largest and the most flexible group of alternative financing options. The right alternative business lender will probably be someone who has some knowledge of your industry. They may provide a simple loan, repayable with interest and possibly points and a prepayment penalty. On the other hand, there are also alternative business lenders that do not charge points and prepayment penalty fees. Some may want to take an equity position with your company, taking stock in combination with or instead of interest on the private financing they offer you.
Private Equity Lenders
Alternative-Private equity lenders, aka venture capital firms, can be thought of as a group of alternative business lenders, providing alternative financing as a group. Venture capital firms sometimes offer incubators: office suites in which their darling companies (for whom they provide private financing) are housed, watched over, and assisted through the early stages of development. To give private financing groups the returns that their investors are looking for, private equity lenders always want a piece of the action. In exchange for the private financing they offer, private equity lenders take an equity position in your company through stock or some other means and become your financial partner.
Alternative business financing obtained in exchange for stock can be an excellent way to get the initial operating capital needed to start a business, but it can be extremely expensive on the far end. While you will likely not be paying interest in the early stages of your business, you will pay dearly should you become a success.
Real Estate Collateral
If you have real estate to collateralize, you may be able to obtain alternative business financing without having to give away an equity position (and a place on your Board, control of your business decisions and all that comes with having a financial partner) by working with a hard money lender. Naturally, hard money lenders can provide business financing for real estate investment projects, land acquisitions, and construction projects. But, by collateralizing real estate you already own, you may be able to obtain private financing for purposes completely unrelated to real estate. When it comes to hard money alternative business financing, the use of funds is not as important as a clear indication of how the loan will be paid back. Naturally, if you are unable to repay the loan, the real estate collateralized by this kind of alternative financing will be sold off by the alternative financing lender, just as traditional banks foreclose on homes when you cannot pay the mortgage.
Regardless of the path you choose in obtaining business funding, you will find alternative business funding companies are more flexible in lending criteria than banks, SBA, or similar traditional lending institutions.
For Questions about Alternative Business Funding, contact Mount Beacon Consulting today for a Complimentary Business Funding Consultation. Speak with one of our experienced Alternative Business Funding Consultants and see which program will suit your business funding needs most effectively.