6 Non-Bank Financing Methods for Startups


George Gorman, Negosentro |  Money is the major bloodline of any businesses from its planning, capital and technological built up and up to its start of the operation. Ideally, funds are invested by the proprietor or incorporators from their own money pot but in order to be competitive in the market, high end but high-performance machinery and technology are needed. In these situations, one would find oneself at a limit of funding for their businesses but that should not be the case. It is important to know that there are many ways one can find the answer to its capital deficiency other than the traditional Bank loans. The knowledge on handling your finances will make you limitless. Here are some of your options:

Online Lending

Online loan application has set the speedway for quick loan grants for individuals and institutionalize businesses. Now proprietors and stakeholders can fill up forms online and submit requirements thru scan documents.

Some of these online lenders offer through a higher interest rate or a compounded interest which is higher compared to bank loan’s interest rate. You just need to know first the current range of lending rates of the Banks of thru the Central Bank. Computation of interest payment is also a must know, if no table of computation is shown when you are applying for the loan, better to pick up the phone and talk to its lending officer before applying.

A good example of these loans is “payday loans”. These are quick loans usually directly credited to your payroll account. Payday loans have always been there, but lenders market them in various ways to attract more clients. With today’s technological capabilities, most of these lenders can perform transactions online. While it is commendable on their part to offer online transactions, it has been a controversial issue due to threats raised on safety and security.

Angel Investors

Angel Investors are individuals that have the funds and are looking to for investments that can raise earnings higher than putting it to bank deposits or time loans. These investors are critical and would like a sound feasibility plan for the business. They mostly get themselves updated on the market trends. These individuals would mostly ask for interest to its capital share higher than a regular bank deposit but sometimes lower than a regular bank loan, in the form of dividend payment. Some angel investors though would not seek higher capital interest but would act as a silent partner of the business with minimal power to make business decision eyeing for the longevity and income generation of its business undertaking.

Venture Capitalists

Venture Capitalists are an existing business that can provide you the capital machinery or services that you need. More than a supplier-customer relationship, venture capitalists would provide one its products/services with the thought that it will also enrich its own, making the joint venture a win-win situation.

To give an example, a manpower agency can enter into a joint venture with a Manufacturing

Company to supply the latter with manpower force it needs. The manpower agency usually advances the salary of its employees before payment is received from its servicing company. The manufacturing company, on the other hand, will have to incur no cost on employment process, saving the company some labor expenses. Accrual of salaries would entitle the proprietor the ability to generate income first before its labor expenditures.


By the form of mutual funds, an organization, juridical or socially, established by a group of individual that would put into a common fund a sum of money with the intention of either investing the same to gain larger profit or to support the industry it was created for.

Four types of Crowdfunding

Donation: Funds received from social or non-governmental organizations driven to help a specific type of business or industry with no financial return. It only aims to support the success of the business. Good examples of which are those involved in agricultural industries. Most local groups would support the business by funding raw materials needed for its operation.

Debt: Usually offered by financial cooperatives in the form of a loan.

Equity: Usually offered by financial cooperatives in the form of stocks.

Rewards or other value: Usually to partake rights and privileges over the business. Example of which are teachers club to have a room privilege on a hotel for vacation trips.

Invoice Factoring

It is a loan scheme in which a business presents to its creditor its accounts receivable, evidenced by sales invoices plus purchase order from its client, to finance the amount of the receivable in advance and at a discount, the creditor will then be the one to collect payment from the business’ client thus closing the account receivable account.

The creditor takes into consideration the term of payment the business and the customer entered into and credibility and stability of the customer’s business. Usually, top corporations or business are required for this kind of financing. It evaluates the ability of the customer to pay on time the amount of money due. So even if you are a small business which is starting to operate, if you have a well-known client, you can enter into a factoring agreement to have the funds available at the start of the term rather than by the end. A perfect example of business entering into a factoring agreements are construction companies which have long payment terms with its client spread over years upon completion. The availability of funds at the start of the payment term gives the company the liquidity it needs to purchase raw materials needed for the project.

Small Business Grants

These are usually government assisted grants given to agricultural or local products for the promotion of the country’s product to the world market. Some of these grants may come in a form of donation or as a loan with lower interest rate and payment scheme favorable to the business owner.

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