Alternative Business Funding: 8 Things You Need to Know to Finance Your Business

Running your own business isn’t easy, especially when it comes to finding funding. You don’t have a board of directors to lean on for guidance on how best to scale up, or an entire department devoted to managing your business finances. You need to figure out a lot of things on your own, and that’s fine – the most successful entrepreneurs are the ones who know their market and trust their instincts.

But there are a few simple rules that pretty much everyone agrees on about achieving business success:

  • Businesses have to grow to survive.

  • You need money to grow (or sometimes to sustain growth)

  • It’s really hard for small business owners to get funding from traditional lenders.

Here are 8  things you need to know about traditional business loans and alternative funding sources.

1. Why Banks Say No to Small Businesses

It’s no surprise that you probably can’t get a traditional loan if you have a low personal credit score. But there are plenty of other reasons that  banks may think it’s too risky to lend to you. These include lack of collateral, a seemingly non-realistic business plan, being part of an industry that banks think are risky (including restaurants, travel, and consumer financial services), and not asking for enough money - bigger loans are more profitable for banks.

2. Getting a loan takes a lot of time

Even if you meet the criteria above, you’ll need to devote a lot of time to preparing your loan application. Banks need a lot of documentation to evaluate whether they want to approve a loan. Figure on spending about 30 hours in total to gather the information. And since most small business owners are typically working around the clock to keep the company running, that’s a big investment of time with no guaranteed payback.

3. You’ll need more collateral than the requested loan amount

Collateral is assets that can be seized and sold to recover th