In this economic environment, the need for capital is more than ever. When the Fed tightens monetary policy, money becomes less abundant; there’s less money to go around. And since there is less supply of money, banks and investors turn down deals more often, as they become more selective with their deals. That’s where alternative sources of capital come into play with faster and custom-tailored solutions. In this presentation, you’ll discover the many options available to businesses without banks or VCs.
Why Write this Report?
At our advisory, we see deals where the owners (or C-suites) don’t know what alternative financing options are available. Many times, they’re familiar with non-bank options but don’t know how they work. Other times, the capital they raise may not be a fit for their cash flow cycle. And unfortunately, sometimes we get to a business and it’s too late — having taken the wrong capital for their needs. So we put together this report to help businesses avoid common pitfalls of raising non-bank capital.
In this report, we go through each potential asset or income statement line item that one could possibly finance. And this is the same approach our advisors take in helping businesses raise capital.
If you’re looking to raise capital for your business at any stage, we encourage you to read our free 20-page report, which we hope you find useful.
View our Full Presentation here.
Summary of Financing Options Available to Raise Capital
1. Raise Capital with A/R Financing (Accounts Receivable Financing)
Use your company’s outstanding invoices as collateral to secure immediate funding. This is especially useful for businesses that need to alleviate short-term cash flow issues.
- Provides immediate liquidity
- No need to wait for clients to pay
- Allows you to retain business ownership
2. A/R Factoring (Accounts Receivable Factoring)
Sell your invoices to a third-party company at a discount. This offers immediate cash and transfers the risk of non-payment to the factoring company.
- Immediate access to capital
- Reduces burden of debt collection
- Improves cash flow management
3. Line of Credit (that leverages A/R or Inventory)
A line of credit acts like a credit card for your business. Use Accounts Receivable or Inventory as collateral, and draw funds as needed up to a set limit.
- Flexible access to capital
- Interest only on funds drawn
- Helps manage cash flow effectively
4. Equipment Financing
Borrow money specifically for the purchase of business equipment, which acts as collateral for the loan. Ideal for businesses needing expensive machinery or technology.
- Preserves working capital
- Equipment itself serves as collateral
- Potential tax benefits
5. Commercial Mortgages
Secure property for your business without paying the full price upfront. The property itself serves as collateral for this loan, tailored for business needs.
- Enables property ownership
- Builds business equity
- Interest payments may be tax-deductible
6. Real Estate “Hard Money” Loans
Short-term loans secured by real estate property. These are useful for investors looking to renovate or sell a property quickly.
- Fast access to capital
- Less stringent credit requirements
- Enables quick investment in property
7. Commercial & Industrial (C&I) Term Loans: Raise Capital for CapEx
Borrow a set amount of money with agreed repayment terms. Useful for funding large, specific projects or expenses without giving up business equity.
- Fixed repayment schedule
- No dilution of ownership
- Can improve business credit when repaid responsibly
8. Future Sales Financing: Raise Capital for Growth
Secure capital by promising a portion of future sales. A solution for seasonal businesses that need funds before a busy period and can repay the loan once revenues start flowing in.
- Access to capital when needed
- Repayment aligns with sales cycles
- No need to put up personal or business assets as collateral
This type of financing is best used for growth capital, where the opportunity cost is greater than the cost of capital.
9. PO Financing (Purchase Order Financing)
Get capital based on confirmed purchase orders from customers. The finance company pays the supplier directly, and the loan is repaid once the customer pays for the goods.
- Enables you to take on larger orders
- No need to tie up personal or business assets
- Allows you to grow without additional debt or equity
PO Financing is a very useful option if you’re experience negative working capital. Why? Because financing purchase orders helps increase contribution margin (i.e. gross profit) generated by the business. The more POs you can execute on, the more money you make.
10. Bridge Loans
Short-term loans that “bridge” a gap in financing. Ideal for businesses needing quick funds before longer-term financing is secured.
- Fast funding for immediate needs
- Short-term solution during funding transitions
- Enables you to seize timely opportunities
You Have Many Alternative Options to Raise Capital
Raising capital is a critical step in fueling the growth and sustainability of your business. Fortunately, in today’s financial landscape, you are not confined to the traditional paths of bank loans or equity investors. There are many non-bank financing institutions that can help you fill the void. From leveraging your outstanding invoices with A/R Financing to using future sales or purchase orders to secure immediate funding, these alternatives offer a wide variety of options to raise capital.
These strategies can be particularly beneficial for businesses that need flexibility and want to avoid diluting ownership. As with any financial decision, it’s important to assess the pros and cons and consult with a financial advisor. This ensures that the method you choose to raise capital aligns not only with your immediate needs but also with your long-term business goals and vision.