Young Upstarts

All about entrepreneurship, intrapreneurship, ideas, innovation, and small business.

Short On Funds? Tap These 5 Non-Traditional Sources Of Small Business Financing

Most entrepreneurs face long, tough uphill slogs during their first few years out in the wild. Young founders have it especially rough. Jose Vasquez, CEO of Quez Media Marketing, identifies six extra hurdles young entrepreneurs must navigate. Among them: youthful hubris, external stereotyping (reverse ageism), and lack of experience.

Vasquez also nods to the elephant in the room: funding, or lack thereof.

“Funding is harder to get when you’re young for a number of reasons,” he writes. “You won’t have any personal savings to draw upon, your finances will be less stable, and you won’t have a credit history to show to prospective lenders.”

These five non-traditional sources of startup financing may help — though it’s always prudent to run major decisions by experienced business advisors or financial professionals before pulling the trigger.

1. Small Business Rewards Credit Cards.

For countless small business owners, prudent credit card use is a vital lifeline when cash is tight. Not all business credit cards are created equal, though, so take your time evaluating the best credit card rewards programs and think carefully before making your choice. Once you have your card in hand, use it to fund equipment purchases, pay vendors and suppliers, cover overhead, and more. Just remember to keep your credit utilization ratio low and to pay off your balance in full whenever possible.

2. Traditional Crowdfunding.

Contrary to popular belief, crowdfunding isn’t easy money. It takes real work to put together a successful crowdfunding campaign, even on popular platforms like Kickstarter and Indiegogo.

The potential payoff is well worth it. Other than failure, the most likely scenario finds you meeting your goal with some room to spare and pocketing much-needed seed funding. The windfall from an (unlikely) viral campaign could completely upend your plans and significantly reduce the time needed to reach the long-term goals you’ve set for your company.

3. Equity Crowdfunding.

Unlike traditional crowdfunding, equity crowdfunding involves selling small equity or convertible debt stakes in your company. Under the SEC’s Regulation A+, small businesses can raise up to $20 million in any 12-month period without formal registration. You probably won’t need to raise that much in your first round, but it’s nice to know the option is there. Use a reputable equity crowdfunding platform for maximum visibility and speak with a financial professional before planning your offer.

4. Informal Fundraising Rounds (Friends & Family).

If you’re blessed with a deep-pocketed personal network, what are you waiting for? Swallow your pride and make the rounds. Just make sure you treat friends and family members who invest in your enterprise with the same formality — and legal CYA — as anyone else. Business ideas come and go; bonds of blood and friendship last lifetimes.

5. Peer-to-Peer Loans.

If buttoned-up banks won’t lend to you, maybe your peers will. Peer-to-peer and non-traditional lending marketplaces like Lending Club and OnDeck Capital are lenders of last resort for thousands of small businesses in the U.S. and beyond. You don’t necessarily need stellar credit to qualify for P2P or non-traditional loans, either — though your interest rate will of course reflect your perceived risk.

Choose Your Own Business Adventure.

Not one of these popular small business funding sources is universal. As a unique enterprise, your nascent business will necessarily chart a unique path to (one hopes) profitability and longevity. Don’t feel bound by any of the suggestions on this list — or anything else you might hear through the grapevine. Take sage advice to heart, but remember that you ultimately answer to no one but yourself. That’s the point, after all.

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Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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