It is always challenging to maintain a company’s financial health, no matter the size of the business. Small-medium sized businesses (“SMBs”) are particularly vulnerable to sudden economic downturns, natural or manufactured disasters, and other factors beyond their owners’ control. 

Even in good economic conditions, SMBs tend to be overlooked and underserved in what financing product offerings are available to them. At CFG Merchant Solutions (“CFGMS”), we provide the funding SMBs need to grow and operate their companies. We understand that many American business owners are left without proper funding options from traditional and other commercial banks. CFGMS works with business owners to help them understand which funding products would best for them. 

Small business funding that works with your business needs.

Small businesses’ fragility is heightened by their inability to secure financing in hard times from traditional lending institutions like banks. A small business maimed by a disaster, in dire need of external funding, and with likely a low credit rating is a bank’s very definition of credit risk. 

If your company is one such credit risk or is fortunate enough to need business funding for growth rather than recovery purposes, you can access business capital through other channels than the traditional banks. The innovative alternative financing world has created a variety of options to help you obtain or boost your working capital.

Revenue-based financing is an alternative funding solution designed to serve SMB owner’s objectives.

Still another innovation in the alternative funding landscape is revenue-based financing. This funding option enables small and mid-sized businesses to obtain capital by pledging to repay a multiple of the original amount invested through a percentage of the business’s future ongoing gross sales.

Leveraging of future revenues to obtain currently needed capital is what distinguishes revenue-based financing from both debt and equity financing. 

In debt financing, the borrower sells fixed-income securities or loans  to investors in exchange for capital. Upon maturity, the investors are repaid their entire principal with interest. In equity financing, the borrower issues ownership shares to investors in return for cash. In this arrangement, the amount does not have to be repaid, but the investors have an ownership claim on portion of the company and future revenues .

With revenue-based financing, you wouldn’t have to leverage ownership of your company to fund your current operations. 

If you require external funding for your small business, consider revenue-based financing. It may just be the alternative solution that your company needs.

Learn more about merchant cash advance.

Loan or grant based business capital options

For any small business, access to different working capital options is essential. External funding is beneficial not just for recovery but also for everyday operations, contingency expenses, equipment upgrades, employee training and development, and, of course, expansion. Here are some alternative funding solutions you could consider:

  1. Government grants

Grants are awarded by federal, state, or local agencies to applicants whose proposals pass the criteria of the award-giving entities. 

Typically, these criteria include a reference to public service or the public good. A grant application must show how the business idea or project will impact the public or a particular sector (education, the arts, the sciences, public health, etc.) that the grant-giving agency wishes to aid or support.

Since a government grant is a form of financial assistance or transfer payment rather than a loan, applying for one is more difficult and is subject to strict specifications and requirements. There are detailed reporting processes that demand absolute compliance. The grantee is expected to use the awarded amount exclusively for the purpose stated in their proposal. 

If your business idea carries with it some public benefit, try to obtain a government grant. It will boost not just your company’s finances but its social capital as well, given the prestige that an award confers. The award signals recognition of your business’s value to the public and will likely open more donors’ or investors’ doors to your company. 

  1. SBA and small business loans from banks 

Yes, banks are wary of credit risks and more hospitable to larger businesses, but this category of loans is designed specifically for small businesses. They are a bank-based alternative to traditional bank loans. 

The U.S. Small Business Administration guarantees small to large loans for a range of business needs, including working capital and long-term fixed assets. Banks also have their own small business loan programs for similar purposes. 

These loans offer more lenient terms and lower penalties than traditional bank loans. If you intend to apply for this type of loan, be ready to present a well-prepared business plan along with your application.