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5 Unconventional Loan Options for Small Business Owners

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Tens of millions of small businesses operate in the United States. As a matter of fact, small businesses make up 99.9% of companies domestically.

While the allure of becoming a small business owner is something that speaks to a lot of people, there’s one large barrier that stands in most would-be entrepreneur’s way and that’s money. Starting a company inevitably takes cash and for some, that can be hard to come by, especially with how prudish banks are when it comes to lending.

Enter the unconventional loan.

While conventional borrowing dictates going to a bank and begging for cash, unconventional loans lead small business owners down less traveled avenues in search of funds. Below, we outline a handful of those weird pathways in hopes that they might help you.

1. Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a new borrowing vehicle that allows small business owners to crowdsource the money that they need from thousands of strangers.

The way that it works is that business owners ask for money on popular P2P platforms, then a large pool of lenders decide on whether or not they want to extend that loan. If they do, potentially hundreds of people will lend business owners a piece of the loan that they’ve requested until the loan has been funded.

The lender pool then shares in the loan’s profits.

2. The Government

As it turns out, Uncle Sam isn’t just great at asking for your money come tax time. He’s also good at helping facilitate putting money into your pocket.

The United States government offers a variety of small business loan borrowing options through the SBA and via affiliated lenders like Your FundingTree and others. Browse the options that are offered to see if any of the loans that are backed by the SBA make sense for your organization.

3. Friends and Family

Conventional wisdom would suggest not borrowing from friends and family. Seeing as how this is a piece on unconventional loan options though, we say go for it!

Friends and family members may be willing to invest in your business if you give them a good pitch. Just be sure that you never collect money that you don’t feel confident you can pay back since owing the people you love can result in the loss of your relationship.

4. Selling Invoices

Some clients take months to pay off invoices. If your company needs cash now, you can borrow against your invoices by selling them to factoring companies.

Factoring companies will buy your invoice off of you at a fixed rate (usually around 3%). They will then wait for your client to pay them.

5. Borrowing From Customers

Some organizations that provide services to their community borrow from their customers. Farmers, for example, might source money from the area to plant their crops and then pay back their community once the crop yields.

An Unconventional Loan Can Help You Grow a Successful Business

Just because you opt for an unconventional loan doesn’t mean that your company needs to be unconventional. Many mainstream organizations were built off of unique borrowing tactics and we have faith that your business can follow in those footsteps!

Good luck building your company and check out more of the offbeat content on our website for more informative and entertaining pieces.

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