6 Alternative Ways To Finance Your Business

The guide to alternative business financing


Before diving into the nitty-gritty of business, you should have raised a significant (relative) amount of capital. It is not wise to start a profit-making venture and overlook this part. If you have that sense of urgency yet not enough time, the banks seem to be your best bet. But you know they can be a pain, especially with all the requirements.

So what if you can’t take out a loan? It’s time to be creative and resourceful. Consider these six alternatives, some of which are based on Karlene Sinclair-Robinson’s Spank the Bank: The Guide to Alternative Business Financing:

Family and friends

Friends and family remain the most common source of debt financing for startups. Though this alternative looks like an easy solution, it is actually a delicate matter that needs to be approached with discipline. Write your parents, siblings, relatives, or pals a promissory note and follow fixed repayment schedules. In some cases, you can offer them nonvoting stock in your company. But treating the loan as money that needs to be repaid, instead of converting it into equity later, will train you to be more diligent about borrowing.

Credit lines

This option needs some sort of foresight from your end. You should have built a good personal credit history, which you can rely on during the early days of your business. Say, you own multiple credit card accounts, you can use them strategically to fund recurring expenses such as software-as-a-service and cyber-security subscriptions. The potential downside here is that this setup can mess up personal and business matters. In the long run, it can come down to how you manage expenses and repayments. If you are confident about your profit margins, you can opt to apply for a business credit card as long as the terms are favorable to you.


Aside from banks, there are private firms and nonprofit groups that extend financial aid to underserved sectors such as small businesses. They support startup enterprises with no track records, which the banks look at primarily. They employ a different evaluation process and cater to small businesses of different natures and sizes. Some use social data to determine how much money to lend.

CDC Small Business Finance, a San Diego-based nonprofit lending company, offers something between $5000 and $50,000. It serves startups, restaurants, and smaller merchants, which many lenders consider as higher risks.

Peer-to-peer lending

Imagine a community of like-minded individuals such as startup founders. They have banded together for a common purpose, and that is to help each other’s businesses get off the ground. This method has been around for many years. Recently, innovations have been introduced specifically in the digital space. P2P lending platforms offer debt financing without the need for a financial institution. Lending Club, the largest of them, has issued $20 billion since its inception in 2007. Its repayment periods last 36 or 60 months for small and medium enterprises.


This approach is similar with P2P lending in the sense that it relies on like-minded people banding together for a common cause. But the similarities can end there. In crowdfunding, founders usually put up their story on a dedicated platform such as Kickstarter. The story usually contains detailed information about the prototype, its purpose, and its potential to make money. Then the founders promise to send samples to sponsors once they’ve reached the target amount of capital or orders. The particulars vary per case. You can go this route if you believe that your product has some distinctive features and solves a particular social problem.

Forex trading

You’re pressed for time, you say? It may not be the answer to your start-up capital woes, but it’s a way to bolster your income. While you are still earning an employee’s salary, you can put a fraction of it in investments. Foreign exchange (forex) trading is one of the most common options. Instead of buying or selling company shares, you are trading currencies in the forex market. Unlike the stock market, it has fewer selections, making it an ideal place to start.

However, it will still require effort and time on your end. Find a reliable source of forex trading tutorials and stick with it. Over time, you will be able to develop your own strategy. Using one of the trusted and investor-friendly platforms will also help.


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