3 Ways To Secure Fund In A Bad Economy

It is already difficult enough to acquire fund when the economy is in good condition and it can be considered as extremely difficult to get one when the economy suffers. Bank financing is the common option when we look for loans. However, the chance of getting a financing can be difficult for small businesses when experts and the media continue to warn us that we are about to experience the worst recession since the Great Depression in 1930’s. So, what we should do when our chance is slim to none? Needless to say, ti is generally important to make sure that we obtain creative approaches.

There are things we could do to jump-start the whole financing process.

  1. Approach family and friends: Borrowing money from our family and friends could be the first thing we consider if we have good relationship with a wealthy and generous individual. In fact, Richard Branson founded Virgin Records by borrowing money from his aunt. When borrowing from someone we know, we could be sure to get low or no interest rates. The approval process can be much simpler and the terms will be more flexible. The lending requirements and criteria could be based on specific personal relationships. However, we should make sure that treat this arrangement in a professional manner, so we won’t damage personal relationships with our friends and family members. Just like when approaching a bank or investor, we should also be able to persuasively explain our intention by offering a short presentation. However, if our friends and family don’t seem to understand all the nitty-gritty details of our business, we could just provide them with the basic information. Things we could explain may include repayment plan, potential risks and goals. By offering good presentation, we could effectively squash any worry.
  2. Peer-to-Peer Lending: It is also about getting financing from personal lenders, but it is a more structured relationship. By choosing peer-to-peer lending, we would eliminate emotional factors in the lending process and we could ease any possibility of tense situation, associated with borrowing money from someone we know. The process could start from online contacts and the lender could have an online profile that we can access. It should be noted that these personal lenders may not be willing to provide financing for people with poor credit history.
  3. Exchange invoices: One way to make sure that our company’s cash flow continues to proceed during an economic downturn is that by selling invoices to factoring firms. In fact, we could consider account receivable financing as an alternative method that isn’t really a loan. Any credit decision can be based on our creditworthiness and we should also provide any detail that could provide us with leverage.

In a time when many banks become very restrictive in providing loans to start-ups, we should take advantage of any alternative financing method.

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