Nontraditional Resources for Financing

Posted by: Today's Tip Contributor on February 26

Obtaining financing or capital is not impossible these days, but small business owners need to be creative in thinking about where to look for it. Consider these two resources when looking for financing:

1. Suppliers. Relationships that small business owners have with their suppliers can be a great resource for financing. Small business owners should do their due diligence, though, just as the bank would, and check the creditworthiness of their suppliers and have a lawyer draw up a formal loan agreement. Protective regulations, such as a Uniform Commercial Code filing, are helpful if financing does not come through.

2. Networking. Attending as many meet-ups and networking events as possible allows small business owners to connect with people in person. Whether these events are local or international, small business owners can continue to build these relationships online through niche Web sites with forums to engage in discussions, ask questions, and seek advice. More and more small business owners and entrepreneurs are turning to these sites and finding the resources they need for financing.

While there are signs economic recovery may be on its way, bank loans, venture capital, and angel investor loans will still be hard to come by this year. Small businesses should take a look around them to evaluate existing and new business relationships for potential financing before turning to traditional resources.

Steve Nielsen
CEO
PartnerUp
Minneapolis

Reader Comments

me

February 26, 2010 03:13 PM

This is the most useless thing I may have ever read. Do they really pay you for gems like this? You should think about a new job.

Amanda

February 26, 2010 03:34 PM

While these are great tips, another viable option for SMBs to improve cash flow is receivables finance. That said, I’d like to add an innovative alternative working capital solution to your toolbox – an online exchange for selling select accounts receivable through auction. The fact is, the age of relying on one source of funding is over. Never before has there been a universal system for distributing capital to the companies that need it, when they need it, at the price that they deserve…until recently. The Receivables Exchange has helped hundreds of companies convert receivables into cash without increasing their debt position or incurring large upfront fees or term commitments. The Receivables Exchange puts the business in complete control of their financing, while providing transparency, price visibility and quick access to a competitive source of funding through an online auction marketplace. In order to remain nimble in times of uncertainty and take advantage of growth opportunities as the economy improves, they will certainly need to explore new ways to improve their influx of cash.

Prof P.Madhu Sudana Rao,&Mulgeta Damie

February 27, 2010 02:50 AM

For a successful, honest, longstanding, well built goodwill small business institution, there are several non traditional sources finances which may be more than traditional sources and with a less cost also. .If he has latest technology,unique product and quality,reputation ,some of the following are some examples of non traditional sources of finance.The list is only illustrative but not exhaustive.An entrepreneur should build up his industry infrastructure, like land and buildings,plant and machinery with own funds and if possible there should be a home for his staying comfortably, to have personnel supervision and control.He should not divert his reserves and surpluses to other activities and should fully develop his industry, with out outside finances including traditional sources of finances.However some of the non traditional sources are,
1.Loans and advances from friends and relatives
2.Trade credit,
3.Advances and deposits from buyers
4.short term and call money
5.Reserves and surpluses from own business
6.Purchasing on credit and selling on cash basis
7.Advances from consumers by offering lower prices, without making losses.
8.Public deposits,with his product and personal image
9.Public borrowing for long term on par with traditional institutions,by issue of deposit receipts
10.By offering second mortgage of fixed assets
11.Buying on large quantities when demand is low,and buyers are not available.(May be risky)
12.By opening a sales counter at the factory premises and selling the commodities for cash at lower prices than market rates.
13.Buy back arrangements of finished goods with the suppliers.
The unit should have very good relations with suppliers, manufacturers,customers, consumers,and public in general.
The unit must also be concerned with the welfare of the society.For a successful businessman money availability is never a hurdle in any country.

Prof.P.Madhu Sudana Rao

March 1, 2010 06:10 AM

My views on non traditional sources of finance/Improving finance and cash flows:
For a successful, honest, longstanding, well built goodwill small
business institution, there are several non traditional sources
finances which may be more than traditional sources and with a less
cost also. .If he has latest technology, unique product and quality,
reputation, some of the following are some examples of non traditional
sources of finance. The list is only illustrative but not exhaustive.
An entrepreneur should build up his industry infrastructure, like land
and buildings, plant and machinery with own funds and if possible
there should be a home for his staying comfortably, to have personnel
supervision and control. He should not divert his reserves and
surpluses to other activities and should fully develop his industry,
without outside finances including traditional sources of finances.
However some of the non traditional sources are,
1.Loans and advances from friends and relatives 2.Trade credit,
3.Advances and deposits from buyers
4.short term and call money
5.Reserves and surpluses from own business 6.Purchasing on credit and
selling on cash basis 7.Advances from consumers by offering lower
prices, without making losses.
8. Public deposits, with his product and personal image
9.Public borrowing for long term on par with traditional institutions,
by issue of deposit receipts
10.By offering second mortgage of fixed assets 11.Buying on large
quantities when demand is low, and buyers are not available.(May be
risky)
12.By opening a sales counter at the factory premises and selling the
commodities for cash at lower prices than market rates.
13. Buy back arrangements of finished goods with the suppliers.
The unit should have very good relations with suppliers,
manufacturers, customers, consumers, and public in general. The unit
must also be concerned with the welfare of the society. For a
successful businessman money availability is never a hurdle in any
country.

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