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How to grow your business through alternative finance

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Growing your business may sometimes call for a little push from alternative sources of finance.

You may need an alternative source of funds due to low income, delayed income, business losses, among many other reasons.

This article gives you smart financial alternatives such as crowdfunding, P2P loans, and R&D loans to help you grow your business.

It is essential for your business plan always to have a financial Plan B to prevent it from experiencing significant losses or, even worse, bankruptcy.

These financial options will equip you with the knowledge and the procedures to take should you find yourself in a tight financial situation.

Types of alternative finance

Crowdfunding

Crowdfunding is the process of collecting money from many people to fund a project, plan, or proposal mostly through the internet on sites like Kickstarter, and GoFundMe, among others. You pitch your business on such platforms and then ask for finance to facilitate the business idea or the ongoing business. It can be a fast way to source funds. One of its beneficial points is that you do not have to pay upfront fees.

Crowdfunding helps grow your business both directly and indirectly. Directly, through the actual investment and indirectly through pitching, you are unconsciously marketing your business. Your investor can track your development, and in turn, your brand grows through networks. Since it involves many people, you can get feedback and guidance on how to improve your business and attract customers on social media sites.

P2P loans

P2P means Peer-to-Peer. This kind of lending allows you to take loans from other people directly without a financial institution between the lender and the borrower. It is also called social lending or crowdlending.

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Photo by Samson on Unsplash

There are many P2P sites that you can borrow from, such as Lending Club and Prosper.

In these sites, investors who are the lenders, deposit money to be borrowed as loans.

As an applicant, you must have a financial profile and indicate the interest rate you will pay the money you are loaned. After that, you apply for different loans and agree on the payment with your lender.

P2P significantly boosts your business since you get to pay lower interests than bank loans. Besides, there is a more personal encounter with your lender.

This allows you to negotiate and ask for more time, unlike financial institutions whose activities are mostly rigid and automated. P2P business loans cover star up costs, launching a new product, repair, and maintenance, or marketing.

R&D Finance

R&D (Research and Development) loans use the Research and Development tax credit payments of a company as collateral. These loans work very well for companies that are pre-revenue or between funding rounds.

First, you need to have used the money on R&D in the current financial year. You also have to be patient until the business’ financial year comes around, ensure the accounts are well–prepared, file the R & D tax credit claim as a section of the CT600 form, and finally, have 6-12 weeks of waiting for the credit to be processed. You must be eligible for UK’s R&D tax credit for you to get the R&D loans.

This type of loan covers staff costs, travel expenses directly related to R&D, and vital consumables involved in the R & D process. The funds only cater to the costs of anything related to the research and development of your business. The Research and Development Tax Incentive Finance does not cover infrastructure. Any business, be it small, medium, or large, can apply for these loans except if they do not meet the stated requirements. It takes up to 3 weeks to get R&D finance, including in Canada, where SR&ED can be accessed as well.

R&D tax loans ensure the continuous development of your company. If you take this loan, you will receive it back into Research and Development of your business.

This aids in getting an excellent cash flow at the HMRC as compared to a traditional money lender. It is a better option than selling equity, which is permanent, unlike debt financing, which is temporary and straightforward.

Considering that speed is crucial, this financial alternative allows your business to get funds early, giving them a competitive edge in a couple of months.

Conclusion

There are several available financial options for your business. With all these options comes an opportunity for you to grow and soar to successful business heights. Being smart at how you make these alternative financial funds work for your business is critical. If you consider taking a financial alternative for your business, reading educational research should be your priority to avoid disappointments.

The good news is that this article has adequate research to give you the necessary information you need. If you enjoyed reading this article and you also found it useful, please leave a comment before you go. Remember to share this article widely to help those who do not have this financial knowledge

 
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