Blindbid

Why Every Small Business needs an Alternative Funding Action Plan?

Why Every Small Business needs an Alternative Funding Action Plan?

Why do you need an alternative funding action plan for your small business?  Credit is tight on main street.   Those too big to fail banks and corporations are swimming in cash.  Most of the money is held with a stronger grip than scrooge or is stashed away offshore to avoid the punitive 39% corporate tax, the highest in the world.   What is a small business to do when it needs working capital?   

Blindbid always advises to start with your bank.   Even if you don’t need money right now, pretend that you do.  The economic  situation will not change much in the next 3 to 4 years.   Think stagnation or worse.   Secondly, getting a loan is going to get much tougher, not because banks don’t want to loan due to risk, but because the government regulators are making it much tougher through the new Dodd Frank regulations.  

With Dodd-Frank alone, there are 3,894 pages of proposed regulations and 3,633 pages of final regulations (as of April 13) and we’re only a quarter of the way through the 400-plus rules that must be promulgated. While community banks pride themselves on being flexible and meeting any challenge, there is a tipping point beyond which community banks will find it impossible to compete.” William Grant, Chairman, President and Chief Executive Officer, First United Bank & Trust

“But the role of community banks in advancing and sustaining the recovery is jeopardized by the increasing expense and distraction of regulation drastically out of proportion to any risk posed by community banks. We didn’t cause the recent financial crisis, and we should not bear the weight of new, overreaching regulation intended to address it.” Samuel Vallandingham, Vice President and Chief Information Officer, First State Bank

Blindbid’s advice is to small business merchants is to create an action plan to obtain credit and update it every 6 months, even if you don’t have an immediate need for the funding.   Our company has seen many merchants under the false belief that because of their banking relationship and/or credit score they can easily get access to credit and then when they need the credit, they rudely find out that it is not so easy to obtain.  

When your loan gets turned down, where do you turn for funding?    You need to have options if this ever happens.   Blindbid has been working hard in the alternative funding industries to help small businesses get working capital at the lowest cost.  The fact is that alternative funding, unless your relatives chip in, will be more expensive than your bank.  

Blindbid sees two alternative funding choices for small businesses.  The first is merchant cash advance.  Our company works with a network of the top funders to provide up to 10 offers per funding request through a competitive bidding system.  The bidding does help lower the costs, but a merchant cash advance’s factor rate is going to be higher than a bank’s interest rate.  

Merchant cash advance offers one of the quickest sources of funding and one of the least cumbersome.  You don’t have to put up collateral.  Merchant cash advances do come at a much higher cost.  

The second option that we recommend is crowdfunding.  Currently, the law only allows for donation based crowdfunding rather than equity based crowdfunding (issuing shares in your company to small investors).   If you have a unique idea that is appealing to people, you might try to raise funds via Kickstarter.com or Indiegogo.com.  Please be aware that a successful campaign may take several thousand dollars to promote and many unpaid hours.   There have been some great success stories.  Pebble watch raised 10 million dollars in 30 days on Kickstarter.  

Crowdfunding is definitely a growing viable funding option and a wave of the future.  Please check back here if you’d like to learn more.  


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