Staying out of your Business overdraft: A look at alternative types of short-term financing

Tue, Mar 15, 2016

Financial Advice

Whether you are a solo entrepreneur or a small, independent business owner, you are likely to require some form of financing during the course of your operation. This is despite a largely positive outlook for the global economy, which may or may or not be impacted by the onset of a worldwide recession later in the year.

Historically, small businesses and solo entrepreneurs have relied on an overdraft for their business bank account, but this has become less viable in the wake of the last recession in 2008. Many banks in the U.S have reduced the overdraft limits available to commercial clients, for example, while the Bank of England (BoE) are reported to have cut £5 million worth of overdrafts daily since 2011.

A look at the alternatives to sourcing an overdraft for your account

With this in mind, your business may need to source an alternative option to agreeing a bank account overdraft. Here are some viable options: –

Crowdfunding and Peer-to-peer lenders

When traditional credit became hard to come by in the wake of the great recession, a number of new and modern alternatives emerged to plug the gap. Take crowdfunding, for example, which is a niche lending option through which brands and small businesses appeal for funds from private investors. This makes funding far more accessible, while you can source capital in exchange for equity or a host of variable incentives. Peer-to-peer lending serves a similar purpose, as you have the flexibility of dealing with private investors in a competitive market.

Asset Financing

On the subject of niche lending, asset finance provides another streamlined option. If you require funds to invest in equipment, fixtures and fittings for your business, this option enables you to source financing for this purpose alone. There are numerous asset finance products available, while existing tools and assets can also be refinanced to create capital. The terms are available for this type of financing also tends to be favourable, as lenders can offset their risk due to lack of variables.

Generate new Income streams

Another method of generating income is to drive product presales or create new income streams, as you generate additional capital that can be reinvested into your firm. For product-orientated firms, one of the best options is to seek out affiliate partners who can serve as additional channels through which to sell. While you will be required to pay a small percentage of all completed transactions when you sell through affiliates such as Amazon, you will also increase turnover and bottom line profit over time.


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