Human scale businesses are often a misfit for banks and other conventional sources of financing. The good news is there are a growing number of alternatives, including innovative collaborations among banks and emerging fintech companies. Here are some resources for financing your business:
- Apruve allows you to offer payment terms to wholesale buyers without having to manage finance receivable.
- Community Funded offers white-labeled donation and rewards-based crowdfunding platforms.
- Kiva crowdfunds character-based microloans.
- LocalStake helps small businesses raise preferred stock, convertible debt, or royalty-based debt.
- P2Bi provides lines of credit and working capital financing to growing businesses that aren’t yet bankable.
- Wefunder is a regulation crowdfunding platform that helps business raise up to $1 million of debt or equity capital.
Small Business Borrowers’ Bill of Rights
We have endorsed the Small Business Borrowers’ Bill of Rights regarding:
- Transparent Pricing and Terms
- Non-Abusive Products
- Responsible Underwriting
- Fair Treatment from Brokers
- Inclusive Credit Access
- Fair Collection Practices
We encourage you to consider lenders and brokers that are signatories.
The Right Financing for Your Business
In this comprehensive and free introductory course, you’ll learn about different types of business financing; how lenders and investors think; how to identify the financing that best fits your needs; and where to turn to get the right financing. There is a lot of material available regarding the what and how of business finance. This course will help you better understand the why.
A marketplace is an online platform that plays an intermediary role to pair businesses that need capital (debt or equity) with investors or lenders. Terms such as “peer-to-peer” and “crowdfunding” have become somewhat less descriptive as a whole as more institutions become involved as lenders and investors. In contrast, direct lenders and investors use their own money. That is, they are principals in the loan or investment transaction, not agents or intermediaries. Hybrid lenders invest some of their own money and syndicate or crowdfund the balance. Their intent is to demonstrate that they have “skin in the game.”
Donation-based crowdfunding is that which results in contributions or grants with no expectation of a return. Rewards-based crowdfunding incorporates tiered premiums or rewards in exchange for a financial contribution. Pre-selling a new product—the production and development of which is crowdfunded—is a form of rewards-based funding. An equity offering includes the sale of common stock, preferred stock, or convertible debt. Debt includes merchant cash advances, receivables financing in its many forms (asset-based line of credit, factoring, purchase order financing, etc.), equipment loans, and term loans.
Apruve is to business-to-business commerce what Visa is to business-to-consumer commerce. That is, Apruve is a business credit network that allows B2B sellers to offer payment terms to buyers without having to underwrite, manage, and finance accounts receivable. In effect, Apruve matches buyers that want credit with banks that are prepared to provide credit. In the process, the B2B seller is taken out of the credit equation. Apruve calls it, “Credit Management as a Service.” (Marketplace; Debt)
Community Funded offers a white-labeled donation and rewards-based crowdfunding platform. It differs from the likes of Kickstarter and GoFundMe through its emphasis on leveraging and strengthening existing communities such as universities and towns: community-based funding. (Marketplace; Donation, Reward)
Kiva is a non-profit platform for crowdfunding character-based loans using social underwriting. A typical term loan is $5,000 for 24 months at 0% APR. (Marketplace; Debt)
LocalStake helps small businesses raise $50,000 to $500,000 of preferred stock, convertible debt, or royalty-based debt from local investors who might each invest $5,000 to $20,000. While many marketplaces are more toward the “serve yourself” end of the spectrum, Localstake takes a more active, advisory role in its clients’ fundraising process, befitting its facilitation of equity and near-equity types of financing. (Marketplace; Debt, Equity)
P2Bi provides lines of credit backed by accounts receivable and inventory to growing businesses that aren’t yet bankable. Most borrowers have sales of $1 million to $10 million and a credit need for $1 million+. (Hybrid; Debt)
Wefunder is a regulation crowdfunding platform organized as a Public Benefit Corporation. It helps startups and other small businesses raise $50,000 to $1 million of debt or equity capital. (Marketplace; Debt, Equity)