Types of Alternative Funding Services Available to Small Businesses

Alternative Funding Services is available in many forms and can provide the cash you need to reach your goals. As you may have seen with the recent success of crowd-funded projects, there is an abundance of new venture-capital firms that are willing to invest in businesses that they believe have a bright future.


As an entrepreneur, it is important to know whether you are a “Crowdfunding Capital” or not. By knowing the difference between the two you will be able to distinguish yourself from the crowd.


Crowdfunding platforms for capital raising used to be very accessible only to startups, small businesses, and home-based businesses. Since then these platforms have become a popular choice for raising other kinds of funds including angel investors, venture capital, business development funding, and personal funds.


These days, alternative funding services exist in many forms. Some of these include angel investor networks, professional business investment companies, venture capital firms, and financial investors. Here are some of the pros and cons associated with each:


Angel Investor Networks: One of the more popular alternative funding services is Angel Investor Networks. There are several advantages associated with working with an Angel Investor Network. The most notable benefit is the fact that you don’t have to work with traditional investment banks.

Instead, you work with private investors that typically serve as private investment partners who provide either a direct funding source or who act as your liaison with the traditional investment banks.


Professional Business Investment Companies: Working with professional business investment companies is another option that is becoming popular with small businesses that are looking for alternative funding services. There are now dozens of professional business investment companies that serve the small business sector. These companies can invest in the equity of your company, issue a credit to your company, or provide you with debt or lines of credit to use for purchasing your business.


Venture Capitalists: One of the advantages of working with venture capitalists is the fact that they provide seed money – or small business financing – to new and small businesses. They do so by pooling money from several interested funding sources, often through a joint venture.


This is one of the most attractive aspects of working with a venture capitalist because it provides you with the opportunity to finance your business through venture capital. However, there are disadvantages associated with working with venture capitalists.


Payment Services: While some small businesses find that they are capable of managing their own funding needs, other businesses cannot. In this case, alternative funding services such as merchant cash advance loans, application fees, and other charges may be required.


Also, these types of lending programs are not interest-free, so the amount of the loan is usually above the fair market value of the property being financed. In addition, there may also be additional restrictions that you must meet to get approval for the funding.