Financing continues to be a stumbling block for entrepreneurs, particularly African-American owned, with uncertain income and unestablished or blemished credit. However, there are increasingly alternative sources of startup financing and working capital out there for business owners in need of investing in inventory, facilities, and staff to establish a solid market presence and generate profitable revenue stream.
Need capital to help jumpstart or grow your business? From merchant loans to peer lending, here are some alternative financing options.
- PayPal Working Capital. You can borrow up to 8% of your annual PayPal sales. Sites approves funding within minutes. Looks at your PayPal history rather than your personal or business credit score, and allows you to pay one fixed fee without late or early repayment fees.
- OnDeck Capital. Provides funding in as fast as one business day. You must have at least $100,000 in annual revenues and have been in business for at least one year. Can borrow anywhere from $5,000 to $250,000 with a 2.5% origination fee. Interest rate averages around 15% of the total loan.
- Square Capital. In order to apply you must be an online Square merchant with revenues of more than $250,000 per year. Money can be deposited into a business’s bank account as soon as the next business day. Payment options tied directly to card sales, so merchants can pay more when sales are strong and less if business is slow. Note: Square Capital is a cash advance not a loan.
- Funding Circle. This program offers loan amounts from $25,000 to $500,000 over two to five years from investors and institutions. Credit scores, cash flow, and customer reviews are factors for approval from a loan specialist. Origination fee is 2.99% with interest rates starting at 8.99%.
- Lending Club. The online application process takes less than five minutes. Borrowers can get up to $100,000, with interest rates that start at 5.9%, and a one- to five-year payment term. Investors select the loans they want to invest in and receive monthly payments from borrowers.
AngelList. This equity-based crowdfunding site caters to angel investors seeking deals and entrepreneurs seeking capital. It posts online company profiles to help startups attract investments from accredited angel investors. A typical deal is around $250,000 with 70 investors. The carry charge, decided by the lead investor, ranges from 0% to 20%.
EquityNet. An equity-based crowdfunding platform on which startups post their company profiles and present a fundraising campaign to more than 20,000 investors who choose which companies to invest in. Basic features are free but entrepreneurs pay a subscription starting at $109 a month for access to EquityNet’s investor network.