To get the funding they need, many entrepreneurs turn to alternative funding. This broad umbrella term refers to any funding sources that aren’t from traditional banks. That includes advances from fintech companies, loans from peer-to-peer lenders or independent funds, and grants.
Finding these funding sources is the first challenge. If you’re interested in government-guaranteed loans or grants, start your search with the Canada Business Network. Its grants and financing database links to information on government grants, private sector financing, crowdfunding, equity financing, and other opportunities. Some opportunities are earmarked for business owners from historically marginalized groups, such as First Nations people, immigrants, or women.
The application process varies based on the type of program, but be ready to show that your business supports economic development or community growth in your area. Many grants, in particular, hinge on this factor. A funds matching requirement is also a big part of many of these programs.
Cash advances from fintech companies are another huge part of the alternative funding scene. These lenders tend to offer much higher approval rates than traditional banks. Rather than charging interest, they charge an upfront financing fee. When you convert those fees into an effective interest rate, they’re often high but if you need working capital quickly for an expense with a potentially high return on investment, a cash advance from an alternative lender may be just the thing. They also tend to base repayments on your revenue. For instance, you may pay back 10% of your revenue instead of making regular monthly payments.
Typically, you apply for these loans online. The credit requirements vary, but most of these lenders take alternative markers of creditworthiness into account. For instance, they may want to see your cash flow, your revenue, or even your social media engagement. You share this information over their website via your online tools and apps. The whole process takes just a few minutes, and approval is often instant.
Funding is essential to start or expand a business, but it’s not always easy to get. If you get turned down by a bank, there are funding alternatives. The application process may be different, but the end result is the same money in your account.