4 Alternative Sources of Finance for Small Business

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Alternative Sources of Finance for Small Business

How can we find sources of finance for small businesses? Business is a smart way to gain money. Despite it promises you more income even from being regular employers; it also helps your country is more developed.

Unfortunately, there are many businessman-to-be who find it difficult in terms of capital. In fact, not all of them are already rich since the beginning so that starting the business can just be easier.

Are you one of them? If yes, be sure to learn about the alternative of finance sources for business below.

Alternative Sources of Finance for Small Business
Alternative Sources of Finance for Small Business

#Borrow Money from the Bank

This way is probably one which comes to your mind first when wanting to start your business. Indeed, many other people also do the same thing.

There are some benefits to borrowing money from the bank. The main one is the number can be big enough for more than $1,000.

Of course, not all the banks release the same regulations about the minimum and maximum number for being borrowed. You need to follow what has been released by the bank you trust.

Besides, there is some other easiness you can find, again, based on the regulation of the related bank.

However, the third method doesn’t mean without any lack of risk. The high interest often haunts the borrowers later.

When your business is not successful, this is a big problem since you can be bankrupt for that.

Therefore, you must calculate well if you want to use this method including the possibility of profits to pay back the money.

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It is necessary to start it with only borrowing less money which means your business should be started from a really small scale as well.

Besides, you can also look for a bank that is friendly enough with the borrowers like it offers low interests and the likes.

#Profit-Sharing Cooperation

The meaning of profit-sharing itself is a model of alternative financing when a business is being capitalized by the lender whether it is individually or group.

There is commonly an agreement in the beginning. Both sides agree that the profits later will be divided for the lender and the borrower. Although this method is good, it is undeniably not really popular.

The main reason is that it is considered as not really beneficial. Yes, once you want to open your business, the main goal is to find profits as many as possible.

Actually, this system is not different from the financing system conducted by big and multinational companies. Those companies must have investors to make sure their business runs well.

The lender in this small-scale company is basically the investor. But the management is done in much simpler ways.

#Be the Reseller

In the beginning, you should not be the ultimate owner. You can start your business by being the reseller at first. Meanwhile, the capitals are from the producers, agencies, and distributors.

However, you must be really smart and accurate to estimate the opportunity of this business in this area. It depends on the trends and whether the product to sell is already available or not in your area.

A good example is you can choose to be a reseller for herbal products when this is still very rare in your area. If it is also added by a fact that many celebrities convert from conventional medication to herbal, it can just be an easy promotion for your business.

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One thing to acknowledge being reseller is that the profits are relatively few in the beginning.

However, it can be a good starting point since the capital you spend is not that big as well. Expanse this business with the profits gained for being more successful.

#Borrow Money from Personals

This method is similar to the bank but you can do it by borrowing people personally. Although the legal bound in this method is not as tight as the bank, you should still be really careful with it.

Once you cannot pay it back to the lender, it is not impossible if the lender may take it on the court. It is better to borrow money from people really close to you.

Family and relatives like parents, brothers, sisters, and close friends can just be done. Although they are people around, you should be a reliable person like paying it back on time.

If it is necessary, you must also pay the installment once the profits are found. Since the key point here is trust, you should not be selfish and attempt to pay the money back even before you use the money for your own necessities.

Of course, making written agreements signed by all parties involved is still recommended here no matter how close the lenders to you.

Make sure also that the lenders lend you money with his or her deposit. It is to avoid him or her collecting the debt before your business gains profits.

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