Alternative Sources of Credit for Small Businesses

If your small businessis struggling to repair damaged credit, then you need to focus on finding reliable, low-risk sources of financing.

Unfortunately, traditional lending institutions are unlikely to extend your business traditional forms of credit (credit cards, lines of credit, business loans) until you are able to establish a record of reliable debt management.

The recent credit crunch has caused lending institutions to tighten their purse strings, and even the most understanding business banker will be hesitant to extend to a business credit with a checkered past. But that’s alright, because in time, your business will repair it’s reputation.

But in the meantime, you need to find capital to keep the lights on. Read on to find out how to secure funding, when banks and major lenders close their doors.

Peer-to-Peer Lending

Peer-to-Peer (P2P) essentially involves marketing your brand to potential investors on the Internet. Websites such as help connect businesses with individual investors who are looking to lend money at a reasonable rate.

As you might expect, P2P lending is a relatively new phenomenon based on web technologies that are rapidly evolving to meet the needs of lenders and entrepreneurs. This means, 1) that it’s a new frontier with flexible rules and standards of practice, and 2) that new resources and opportunities are appearing all the time.

Tread carefully, but remember that boldness is important when it comes time to make your pitch.


Also known as accounts receivable financing, factoring is a way of generating cash quickly by selling your business’s accounts receivable for a portion of their value to investors. Factoring agents offer you a percentage (typically 75%) of the face value of your outstanding accounts, in exchange for the right no collect the full amount once the payments arrive.

Factoring isn’t cheap, but it allows you to essentially borrow money from yourself when your business needs cash in a hurry.

Inventory Financing

Using your inventory as collateral, your business can raise money to meet a working capital shortage. Similar to factoring, inventory financing represents a lower-risk financing option for business owners willing to pay a relatively steep rate of interest.


Take your financial needs to the web. If you have an especially exciting business plan, product, or brand, then take your pitch to a crowdfunding website such as Kickstarter to see if your company can generate interest and cash, from a crowd of anonymous enthusiasts.

In addition to generating capital, crowdfunding allows you to market your brand to potential customers who can build your network as you work to repair your credit.

Continue reading here.


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