Small Business Financing Options

August 22, 2012


Small Business Financing Options
Everyone has been affected by the recession in one way or another. Those individuals who have lost their jobs have been hit extremely hard. Some have struggled to find another job while others have been forced to take lower paying positions in order to survive. Many have decided to take matters into their own hands and start their own business. With small business funding so hard to come by, entrepreneurs often resort to non-traditional ways of financing their dreams.

For many, some of the first sources are family and friends with the means to invest. They are likely to be more lenient with repayment schedules as well as interest rates. But personal loans are not guaranteed and its possible that friends and family may not be able to help you as much as you expect. Also, loved ones asking for status updates on their money can be more intrusive than a financial institution.

There are organizations, such as Open Angel Forum, that connect new businesses with venture capitalists. Though some of these services charge fees, they can be an effective way to contact a large group of motivated investors. Its important to remember that these organizations are not investment firms. They are more like recruiters that bring new businesses and investors together for presentation events [1]. It should also be noted that even though Open Angel does not charge a fee, there are costs associated with generating your proposal, and the competition to present at such events is understandably high.

Working with the United States Small Business Association can be helpful when going for a standard business loan. If you qualify for one of SBAs programs they will back your loan and help set its guidelines. However, the loans are commercial, not government, loans, and the SBAs job is to guarantee that they will be paid back [2]. This could be a moot point in the near future. The SBA lost its ability to make loans under the Small Business Jobs Act as of Dec 31, 2010. This caused a major increase in loan applications before that deadline, and as a result no new loans are currently being accepted by the SBA Loan Queue [3]. Though the SBA still has loan programs, there will be a backlog.

There is also the option of taking on an extra job to generate the starting capital. This is a great way to obtain funds without generating additional debt and interest payments. However, it could take longer to realize your dream since you will be earning your funds at the expense of time that you could be putting into your business.

One viable, but often overlooked, funding method is the selling all or part of an illiquid assets such as a structured settlement, annuity, royalty or pension payments. You will be reducing the number of future payments from your asset but you will also be free from loan payments. In addition, unlike a loan, there are no income requirements or credit checks.

There is more than one way to get your business off of the ground. Nothing happens until you get out there and do it. One of the smartest ways is to use your own funds, rather than borrowed ones, to make your profit. Selling an illiquid asset could provide you with the funds that you need while allowing you the flexibility to grow your business.

There were almost 12,000 more business bankruptcies and closures than new business openings in 2008 [4]. It takes a lot of drive to succeed at your business. You should be taking on the least amount of risk in the process. Using funds you already have to invest in your future could be the most practical option to help you attain your goals. Consider all possibilities. There are more opportunities available to you than you might think.


Jason Sendaula is a freelance writer for Rescue Capital, a specialty finance firm that purchases structured settlements and annuities for a cash lump sum. To learn more about the services they provide visit their website at

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