High Voltage Energy Resources

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Ten Additional Alternative Sources of Capital

What entrepreneurs and business owners must do with regards to financing is to take the same creative approach they often take when addressing issues in other parts of their business. For example, for a company with minimal funds who needs to launch a marketing and public relations campaign, guerilla marketing and public relations tactics can vaunt the company’s exposure to and standing among its target audience. Guerilla marketing requires a highly creative approach and a concentrated effort. Take the same perspective with financing your business and you will reap similar results.

To get creative, focus on WHAT you need the money for, not the actual money. Write down your uses for the funds and the anticipated cost. Example of uses: Employ a general manager – $100,000; Marketing campaign to increase exposure to target customers – $50,000; Deferred maintenance on office and production area – $150,000; Software – $15,000. Next, begin to brainstorm ways to get what you need and want. Again, do NOT focus on the money.

Some creative financing options to acquire employees, marketing, software, etc. are as follows:

1. Co-branding – Combine efforts with a company offering a complementary service or product to reach your target market. You can split the cost or one can do the work and the other pay any external costs involved.
2. Co-operatives – Pool funds with other business owners. Co-ops are relatively common in agriculture and energy.
3. Customer deposits or pre-pays – This is self-explanatory.
4. Employees (Employee Stock Ownership Plans or ESOPs) – Sell the company or a portion of the company to the employees. Not only will this option help you raise funds. It also  engenders strong employee loyalty as employees also become owners.
5. Equity as payment – Obtain management and other highly skilled personnel at below market rate pay by offering an ownership stake in the company either outright or via stock options or restricted stock.
6. Economic development grants – These grants are available in urban and rural areas typically through municipalities that have received federal redevelopment funds from the US Department of Agriculture (USDA), Housing and Urban Development (HUD), or another federal agency.
7. Licensing - Instead of providing your company’s service offering directly to customers, license that offering to a company or other entity that serves your market. Let the licensee(s) expand your market reach and absorb the cost of acquiring new customers.
8. Self-directed IRAs - Place your money into an IRA that allows you to invest directly in private companies. Companies such as Equity Trust support this level of self-direction.
9. Swaps or bartering – Barter your product or service with that of another company. Bartering exchanges exist that enable you to move beyond a one-to-one exchange.
10. Consignment – Retailers and some wholesalers can acquire inventory “free”. Instead of paying in advance for inventory and absorbing the cost, agree to offer another party’s item for sale in exchange for a significant percentage of the sale. If you do not sell it within a specified period, the item will be returned to the owner.

These are just some ideas to get your creative juices flowing. There are many other options available, some of which may be specific to your industry or business type.

About the Author

Tiffany Wright, small business advisor and author of Help! I Need Money for My Business Now!!, has compiled a number of easy-to-follow examples and case studies that will lead you step-by-step through the process of financing your business. In under 90 days you can rev up your company’s cash flow…without a CFO! Available at www.moneytogrowbusiness.com. Subscribe to her monthly newsletter: *Small Business Financing Forum*. Send an email to newsletter@tocafamily.com with ”Newsletter” in the subject and your name in the body.