5 Ways To Fund Your Business That Most Entrepreneurs Forget About

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08/19/2016 09:38 am ET Updated Aug 20, 2017

There are many unorthodox ways to fund your business. If you're trying to raise money and angel investors won't bite you might be wondering whether you'll ever get your company off the ground. With the payments industry being disrupted and a whole host of other changes coming to the world of finance, now has never been a better time to start a new business.

You're going to find out about some of the ways you can fund your business through a number of alternative financing options that most entrepreneurs forget about.

You Can Use Personal Credit Cards

Business credit cards might not be available to you as a startup. Even those that are available to your startup likely don't offer a huge amount of capital. But before you completely do away with the idea of credit cards you can look at personal credit cards.

Your personal credit rating can be used to acquire credit cards with much higher balances. You still need to be careful about how your business borrowing will impact your personal credit rating on these cards, but they're still useful as a working capital loan option.

Try Factoring (if you can find something)

One of the oldest online lending options is known as factoring. This is essentially where you sell your accounts receivable to a financial institution. The lender is essentially giving you the money for your potential sales in advance. For example, a soccer team could mortgage season tickets for the following season in order to get money now.

The only downside to this method is if you have lower than average sales you could be left with a bill you can't pay. It's much harder for startups to indulge in factoring than older companies because of a lack of assets.

Peer-to-Peer Lenders

Funding your business can be tough if the banks don't want to help. But when VCs aren't interested and you don't know where to turn you could always consider peer-to-peer lending. This type of lending can involve someone you know or a complete stranger. The way it works is a peer will lend you the money at an agreed interest rate, or a portion of the equity of your firm.

In many cases you'll never even meet the lender because everything happens online. What you have to bear in mind is that with businesses needing to exist for 2-3 years before becoming eligible for a working capital loan this is a more viable option than you think.

Convertible Debt Instruments

A convertible debt instrument sounds confusing. Really it's just a type of asset-backed loan. The choice is up to the lender as to whether they simply want their money back or whether they want equity in the future. The lender can decide that they want a certain amount of equity in the company if everything goes well. Alternatively, they can also demand their money back if it isn't going well.

By being more flexible you're potentially making it easier for you to find a lender. The downside to using convertible debt instruments is you could lose a big chunk of your company if it happens to perform better than anticipated.

Search for Business Grants

There are a lot of depressed areas of the country. Local government wants to attract businesses to these areas so they can rejuvenate them. In exchange for agreeing to setup a business there they will offer grants and loans. These tend to come with strict conditions, but if you can obtain them you're guaranteed to get a lot of money with low interest rates.

Unless you're lucky enough to be living in a depressed area, you will have to be flexible if you want to take this funding option. Furthermore, you need to remember that many of these areas are depressed for a reason. If brick and mortar stores are folding by the dozen it makes no sense to start a business, there no matter how many grants are available.

Go Back to Bootstrapping

These methods aren't for everyone. If you can't find a method that you like you should think about bootstrapping instead. This is where you will use what you have to build your company. You might try some tactics like bartering to get things done. It all depends on your circumstances and what you have to offer.

More and more businesses are deciding to go down the bootstrapping route these days. Have you ever tried bootstrapping your organization before?