The Search for Alternative Funding, and How To Find What is Right For You

Searching for funding can be an extremely daunting task. Especially, when you consider the many various opportunities for alternative funding that we discussed previously. With the knowledge of all that is out there, where do you start? We sat down with Bennett Brown of Thunderbird Corporate Finance, who provided some more information and advice on how to seek out alternative financing.

That first step would be, without a doubt, to talk to your bank. We encourage you to establish a relationship with your bank, even before you need financing. That way, when you do require further funding, you are ready to sit down and discuss with a banker what options are suitable for you. If you’ve already created a relationship with your bank, the banker will have an idea on the amount of financing you’ll need and also what types of financing may be appropriate in your situation. Even if the bank cannot provide the money -- let’s say you don’t meet some of their requirements -- they still will want to help you. They can advise you about alternatives that may suit your situation. But, that’s only if they understand your situation and know you!

A second, extremely useful option would be to reach out to independent brokers. Their job is to find the perfect financing solution for your situation. These brokers are familiar with many more opportunities than you are, even with surface-level knowledge of the many different options for funding. A broker devotes their career to seek out the different ways that a company can get the financing they need. They will have multiple contacts and experiences with lenders throughout the financing world. Plus, these brokers may specialize in certain industries. Find brokers that are familiar with lenders in your industry; these are the individuals that will be able to quickly and accurately match you with the financing that will work best for you.

Now, alternative financing products can be more expensive than a long-term, low-interest bank loan. So, how can businesses transition away from alternative financing to something that will help them save more money? Well, the solution is simple: you need to find out what you are lacking that prevents the bank from lending you money. Banks will have strict guidelines for businesses to meet to take out a loan. This may be a good time to speak with your banker to discuss what your company is lacking and what steps need to be taken. Once you’ve found that gap, make efforts to close it. Alternative financing can provide the safety net to allow you to focus on your company and better establish it as a suitable business to receive bank loans.

It is important to consider, however, that the money from the bank will have more strings attached and more rules that you are expected to follow. Alternative financing will not have as many strings. Some companies will weigh their options and determine that, despite the extra cost, the alternative sources of funding provide more opportunities within their situation. When taking out funding, it is important to look at the full picture and consider how these loans are going to impact the business in the future.

When searching for alternative funding, it truly comes down to research. The first lender you find will probably not be the one with the best deal or the one that best helps your business. So, how can you conduct this research? Ask people! Talk to different professionals in your industry. Talk to your bank. Reach out to brokers. This research, of course, can take hours, days, even weeks. If you can’t spend the time researching, then this is a good opportunity to find an independent broker that can do the research for you.

At the end of the day, you need to recognize what your company values. Do you want the cheapest option, or the one with the least strings attached? Are you more focused on receiving the money as quickly as possible, or would you prefer a more long-term opportunity? Once you’ve outlined your values and needs, you’ll be better able to find the funding that suits your needs best. 

If you’d like to hear a more in-depth conversation about how to find alternative financing, please check out our podcast, Funding Quest, wherever you listen to podcasts. Bennett Brown can be found through his website, Thunderbirdcorpfin.com.