January 23, 2019 | By Peyton Sawyer


Small business man evaluating alternative funding options


Starting, growing, and sustaining a small business is never an easy task. While being employed by a company has its advantages, is it as rewarding? Applying the knowledge you have gained over the years and using your creativity to build a business from the ground up can be most rewarding indeed.

Despite the challenges that come along with owning a small business, it has the power to fill the void that working for someone can leave you with. Providing the fulfillment and sense of accomplishment you were looking for on a professional level.


While branching out on your own may have always been the plan, did you anticipate being met with such disregard?

Many business owners and entrepreneurs just getting started are dealing with business funding hurdles that ultimately result in denial.

Traditional Business Funding

Traditional business funding from a banking institution do not make it easy for small business owners to access funding. You may wonder why that happens? And what choices you are left with when it does?

Funding Reforms on Traditional Business Funds

Applying for a traditional business fund with a major bank is usually the first step in every business owners search for funding.


The problem with this funding option is the difficult approval process that tightened regulations have introduced. The financial crisis that occurred some years ago, prompted a series of funding reforms, that resulted in stricter regulations and limited credit available to small business entities.

When compared to big businesses and large corporations, small businesses presented greater funding risks, which made banking institutions nervous.


Since underwriting small funds costs just as much as it did for a larger one, they shifted focused and decided that small businesses were not worth the risk. Because of this, big banks limited the business funding that was once available to small business owners.

Using a Business Credit Card

Many small business owners use a business credit card as a form of working capital. Accessing funding through a line of credit on a credit card to make purchases and cash withdraws can help to sustain a business.


But remember, like a personal credit card, a business credit card also carries an interest charge. If you are only paying the minimum amount due each month, you will be charged interest on the total amount every billing cycle.

Approval for a business credit card from a bank will depend on the applicant's credit score, just as a personal credit card does. If your credit history is not good or you do not have enough credit then your request for credit will be rejected.

Tapping Into Your Working Capital

Working capital is the measure of a business's short-term financial health and its operational efficiency. A working capital ratio consists of current assets and current liabilities.


The ratio indicates if a business has enough short-term assets to cover their short-term liability. In more simpler terms, your working capital is your business assets minus your business liability. For example, if you have $10,000 in total current assets and $4,000 in total current liabilities, then you have $6,000 in working capital.


Having a healthy working capital means that your business assets should exceed your business liabilities. If they do not, then your business can run the risk of defaulting on creditor payments or even going bankrupt.

You can use working capital to help grow or sustain your business if a business fund from a traditional funder is not an option, but you can also look into alternative business funding options if you do not have a sufficient amount of working capital available.


Non-Traditional or Alternative Funding Options

As a small business owner, you may want to look into all business funding options. There are several non-traditional funders to speak of, that can provide you with online funding and alternative business funding options.


It's up to you, to take the time to evaluate each alternative option so that you find the best fit for your business.

Online Funders

Several alternative funding solutions, like online funding, are becoming quite popular in the funding market.


Small businesses are looking to online funding as an easy solution to their fast cash needs. With the easy access online funding provides, and the speedy processing, its popularity will only increase.

While online funders may charge a higher interest rate than private funders, such as a traditional banking institution that is subject to federal regulations, it may be a business ownerís only option for funding.


If you do not have the credit, length of time your business is required to be in operation, or the collateral needed to be approved by the bank, alternative funding is a viable option.


Evaluating your small business 

Alternative Business Funding

When you have exhausted all major bank options, with nothing to show for it other than a rejection letter, don't worry! All has not been lost. You do have other options.


With the funding reform making it next to impossible for small businesses to receive any kind of traditional funding, business owners have started to look into other business funding alternatives.

Today, you will find that the option of alternative funding is becoming increasingly popular in the small business world. Alternative funders are introducing more attainable funding options for the borrower, without the strict guidelines of a traditional bank.


While these alternative business funding options have leveled the playing field, making it easier for small business owners to receive financial assistance, they also have the potential to damage your business health.


It is important to always make sure that you only borrow what you need, nothing more, and secure an interest and payment schedule that your business can afford. Understanding the terms and conditions of the funding agreement before you sign can help when deciding if the offer is right for you and your business.