Can’t get a bank loan

How to grow a business when you can’t get a bank loan

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Can’t get a bank loan? You’re not alone, and you have more options when trying to fund your business growth.

Can’t get a bank loan

Photo by Jopwell

Startup capital is the number one obstacle to starting a business and then growing it to new heights. Getting a bank loan is difficult without a proven business history that shows your creditworthiness—and draining your savings to start a business is a risky move.

If you can’t get a bank loan, there’s no reason to abandon your entrepreneurial dreams. Here are three strategies you can use to start a business and grow it with limited working capital.

Start a low-cost business

Some businesses require five figures to launch, but there are a lot of businesses you can start without a major investment.

  • Online businesses are among the cheapest to start. Examples include selling virtual services, creating digital products or starting a no-inventory eCommerce business using dropshipping and print-on-demand services.
  • If you prefer to keep it close to home, look to local services businesses like pet care, lawn care or cleaning services. Think about how you might scale those into bigger operations, and you could take a traditional small job and turn it into a bigger business operation! 
  • Freelancing businesses are another top choice for first-time entrepreneurs. You can start a freelance business on the side or full-time using online marketplaces to build your client roster.

Your choice of business entity affects the costs of starting a business. Corporations come with additional startup costs but could be the right choice for your structure. While sole proprietorships and LLCs are inexpensive to form, they also come with limitations, so it’s important to consider the pros, cons and get professional advice on the route to follow.

Find business investors

What if you have lofty business dreams but lack the capital to make them a reality? When you have a great idea but no money to get it off the ground, turn to investors.

  • Angel investors and venture capitalists are two major sources of equity funding for startups. This type of investor is often suited for high-growth startups with the potential for large returns.
  • Startup accelerators help new business owners connect with investors. Some business accelerators provide capital directly to startups, sometimes in exchange for equity.
  • Many small startups find success with crowdfunding. The best crowdfunding strategies offer equity or non-financial rewards in exchange for contributions.

Apply for alternative financing

Business loans aren’t the only way to finance your venture. These financing alternatives appeal to entrepreneurs who can’t get traditional business loans or bank funding. 

In many cases, alternative financing can be leveraged alongside your traditional funding, and at Liquid Capital, we’re happy to work with your banker, traditional lender and other financial institution. Essentially, we become your funding team, which can supercharge your financing abilities.

  • Peer-to-peer lending uses unsecured personal loans through P2P lending platforms to provide startup business capital. Because P2P lending isn’t FDIC-insured, it’s important to understand the risks.
  • Equipment financing helps founders buy equipment without the barriers of traditional bank financing. Because the business equipment serves as collateral, you may not need credit history to qualify.
  • Early-stage businesses can maximize growth using invoice factoring. Invoice factoring turns unpaid invoices into cash to free up working capital.
  • When all else fails, bootstrapping is a proven way to build a business from the ground up. Instead of relying on outside funding, bootstrapping grows a startup slowly using its own funds.

Of course, we don’t want you to struggle to get funding, so give us a call and we can walk through all the options with you.

Scaling a business?

You don’t have to choose between draining your savings and giving up on your business goals. With the right strategy, you can start a business without putting your personal finances on the line. Use these resources to learn more about your startup financing options and discover your business’s path to success.

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