3 Top Ways to Raise Money Today

As a new decade kicks off, many things in our economy have changed. One in particular is the ability of small businesses to find and obtain money for their companies.

Banks are not lending to these businesses for reasons both internal to their organizations (like tightened credit policies) and reasons external to them (like over regulation).

Whatever the reason, small businesses continue to struggle raising money for their operations.

But, while the rules and availability of business loans have changed, it does not mean that capital can not be had. It just takes a little creativity, a little persistence and a lot of understanding of the different loan products that are available.

The following are three options today for raising money for small businesses:

Finding unsecured money for your business is probably a thing of the past. Hardly any bank or lender's credit policy will allow for unsecured loans any more. And, those businesses with the ability to still qualify for such products (strong credit, strong market demand, and tons of positive cash flow) usually do not need or will not apply for these business loans - they just don't need outside capital to grow their business.

Thus, all business loans today must be secured some how or some way.

The first way in raising money for your business is by securing it with physical assets. Clearly, we all understand that using the assets that your business plans to purchase (like property, equipment, etc) is a pretty straight forward loan process. Thus, you only have to come up with 20% of the purchase price and finance the rest. But, this does not put money in your business - money needed for working capital, to meet current obligations or to generate new business.

However, if your business currently has these types of assets - they can be refinanced with a "cash out" option or sold to a lender for cash - then leased back.

Example, your commercial property is worth $200,000 and you only owe $100,000 on it. Thus, you have $80,000 in equity ($200,000 value - $100,000 owed - less 20% required down payment or LTV). Thus, you can tap that $80,000 for additional capital in your business.

Or, let's say you own several pieces of equipment (or even just one) - and you own them outright. Many private equipment lenders can purchase those pieces of equipment from you (injecting cash into your business) - then lease those assets back to your company (called a sale / lease back). Now, remember, this is just a paper transaction and the equipment does not have to change hands. Thus, you get capital for your business by selling that equipment then all you have to do is make payments on those piece(s) just like you would on a standard business loan. Plus, if structured correctly, might even provide some tax advantage.

The second way in raising money for your business is using your financial assets - assets acquired in the course of running your company. These include Accounts Receivables and Purchase Orders.

With accounts receivable, a business usually has already provided a good or service to its customers and is just waiting to get paid - say 30 days or more. But, in the mean time, the business's suppliers, vendors, employees, etc are expecting to get paid - now. The business could factor those receivables (invoices) and get the capital it needs today to meet these other obligations and let the factor wait on the business's customers to pay.

With purchase order financing, a business might have an order in hand from a solid customers. But, the business does not have the capital to complete the job - to purchase raw materials or supplies or even hire the labor it needs. But, it can factor those purchase order and receive up to 100% of the cash it needs to complete that job(s). Then, when the job is done and the customer pays, the factor is paid back for the advance.

The above methods are actually based on the conversion of assets to secure a loan. These usually don't rely on the credit history or profitability of the borrower (you and your business) - but on the strength of the assets and the businesses ability to get and generate that business.

The last way in raising money for your business is by using your retirement funds. Any retirement accounts that can be rolled over into a self-directed account like IRAs, 401(k)s, SEPs and 403(b)s can be used to invest into any business - including your own. These funds can be used for starting a business, buying a business or franchise or even as the down payment equity portion of a larger bank or SBA loan - all without tax liabilities and distribution penalties.

What is better - letting your retirement funds sit in an account and maybe earn 5% a year if the market is good and growing or use those funds to build your business and realize your entrepreneurial and financial dreams?

So, while banks and other lenders might not be willing to take a chance on you or your business - it does not mean that you have no other options for a business loan. You just have to be creative and persistence and ensure that you understand the options open to your business and how to take full advantage of them!

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