When finances are tight, business owners seek other alternatives to rescue their companies. Debt financing happens to be one of the many options that successful and not so successful business owners rely on. According to most entrepreneurs, it is the most common way to acquire a substantial amount of money.
Lucky for you, you do not have to turn to debt financing for you to take your business (or investment) to the next level. Even though the money borrowed has to be paid back, there is more to becoming an entrepreneur than just borrowing money from the bank. Debt review can help manage finances responsibly.
Mentioned below are some alternatives to choose from other than debt financing. These alternatives are meant to help you find the money you need. Out of the eight options below, choose one that suits you best.
- Equity financing – this is a way of raising capital without borrowing money. With equity financing, you sell the company’s assets (or shares) to investors.
- Hybrid financing – in the world of finance, hybrid financing involves factors of both debt and equity. Warrants, debentures, shares, leasing and preference capital are the most common forms of hybrid financing.
- Peer lenders – peer lenders may be your friends or your close family members. The ‘agreement to pay’ terms, flexibility and access to money depends on your lender. There may be no set standards whatsoever, making this an informal transaction. With peer lenders, your time to pay may be extended unconditionally.
- Credit card financing – credit card financing totally depends on your credit history. If it’s good, then you can easily have access to money via credit card. However, there are a few drawbacks where credit card financing is involved. The amount available to you might be limited and you will be paying at higher rates. If payment is delayed, you may be penalized.
- Mezzanine financing – mezzanine capital is a debt that presents a claim on assets. With mezzanine financing the lender has ownership rights if the loan is not paid back on time or in full amount.
- Savings – as lame as it sounds, you can be able to save up to a reasonable amount of money within a given period of time. Having in mind what exactly you want and how much money you need, you can start saving on that.
- Crowd funding – have you ever put this into consideration. It might not be easy to find a crowd of people ready to fund your business, but giving it a try doesn’t break a bone. Ignore all the odds and give a try, luck maybe on your side.
- Pledge your earnings –are you a risk taker? If yes, then this option will interest you. You can place a bet on your lifetime earnings. Basically, you will have to agree to cut a percentage of your earnings in exchange of money. For example, your lender can give you $600,000 and in return own probably 5% of your earnings for as long as you live.
