Who Uses Creative Financing?

Creative financing is becoming a popular means of funding for small business entrepreneurs who cannot get a bank loan or who do not want to take on its financial burden. This type of financing, which involves funding a startup through means other than a bank loan, is becoming more popular as people strive to leave traditional jobs behind in order to work for themselves. While non-traditional business funding may seem outside the pale, many individuals and businesses are using it to help them build working capital and grow faster than they might with a bank loan.

Some small businesses use creative financing to buy real estate when they are ready to expand. For example, a dog grooming startup has outgrown its original space and the owner wants to buy vacant property next door or even down the block for storage or office space. However, if the business is still experiencing slow growth, the owner might use non-traditional financing, such as asking its loyal customers to crowdfund the expense. The customers then get a return on this investment when services improve and expand in order to serve them better and the owner is not burdened with a high-interest loan.

Students who are almost done completing their education and ready to launch their own business often use creative financing because their student loans prevent them from taking on more debt. Today’s college graduates amass $30,000 or more in loans by the time they finish their studies, making it difficult for them to get a business loan. Some non-traditional finance options students might use include sharing the cost office space with other startups and using grants sponsored by their university in order to launch their business.

Artists, writers and other creative individuals often forego traditional loans and instead turn to their local community and creative organizations to help fund studio space, publication costs and the supplies needed to create larger projects. Non-profit organizations are one source of possible funding, as is crowdsourcing funds within the art community. This type of funding is often successful because like-minded individuals want to see their peers succeed.

Creative financing is becoming more common as entrepreneurs seek freedom from traditional bank loans. No matter the nature of your business, careful planning is vital to successful financing. Think beyond crowdfunding and consider what local organizations might be interested in helping you launch your company. Creative thinking is just as important in this venture, so plan carefully to maximize your chances of financing success.