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Have you ever been rebuffed by banks when looking for capital for your business, as a lot of business owners have?
Are you looking for an alternative means of getting the money you need? If yes, then you'll want to read what I have to say.
Creative financing proves to be an alternative funding method. It offers access to quick loans, less stiff terms and conditions, smaller interest rates, and many other benefits.
At a glance, this guide is meant to help you understand how creative financing can help your business yield maximum returns and its importance in empowering your business growth.
We'll also discuss the types that exist that you can implement to help you maximize returns.
Whether you're a small business owner, a startup, or an individual with a project to achieve, the insights we share here will help you make the necessary decisions to grow your business.
Without wasting time, let's get started.
What is Creative Financing?
Creative financing refers to the unconventional methods used to fund a purchase or a particular investment.In simple words, it's thinking outside the box when it comes to sourcing funding to make a purchase of a property, fund a business idea, or make an investment.
Instead of going to a bank for a traditional loan, you become creative by exploring different unique ways to get the funds you need.
Examples of creative financing can include making special arrangements with the seller of the products you need, taking a loan from individuals, or other ways that are different from the normal routes for getting loans.
The Importance of Creative Financing for Empowering Your Business Growth
One of the questions often asked in business is, "Why should I even engage in that thing that's been said or suggested?"Creative financing's importance to you as a business owner cannot be overemphasized, as with it you can maximize returns and empower your business growth.
Quickly, we'll be considering four reasons why it can be your alternative:
1. Access to Capital
You are already used to and most likely tired of the traditional funding methods used by banks.By utilizing unconventional funding methods like creative financing, you can have access to the capital you need for that business or investment you really want to make.
It can grant you access to much-needed capital when you need it.
This is most valuable for start-ups and businesses that do not have a long credit history that banks validate before giving loans.
2. Flexibility
Creative financing will offer you flexibility that you may not have if you take the loan from a bank.Banks usually have strict policies with loans, which may not totally align with your monthly revenue and your remittal agreement.
But with creative financing, there's an allowance that permits flexibility in the remittal of the money obtained.
3. Tailored Solutions
Another important aspect of engaging in creative financing is that it offers you the opportunity to negotiate terms and conditions that are tailored to meet your specific needs or at least favour both parties involved.Compared to the traditional banking system, creative financing can help you customize when you repay the money you owe, how much interest you'll pay, and some other by-the-side arrangements that come along.
4. Faster Decision-making
There are times in business when you need to make a critical and quick decision, like making a purchase or an investment, but you may not have the capital.Going to get a loan from a bank may not really be of help to you at that moment, and this is because of the many policies and the timeframe for getting the loan.
But with this alternative funding method, you can get the money you need and harness such opportunities as they come.
Types of Creative Financing
There are different types of creative financing when we talk about alternative sources for getting finance for your business idea, projects, etc.Let's consider the five major and most common types of creative financing:
1. Seller Financing
For instance, you want to buy a house but do not have all the money to make the purchase (as is common in real estate management and mortgaging processes).With seller financing, the process is easier. Here, the seller of the house plays the role of your "bank" by allowing you to make regular payments in installments based on what you both agree on.
This is what you'll do until the house becomes yours to keep when you've paid the money in full.
2. Lease-to-Own Financing
This type of creative financing works like when you pay money as rent for a car or a house that you're using or living in, respectively.But the twist in lease-to-own financing is that you are offered the opportunity to own the house, car, or anything else even while paying rent.
With your arrangement, some of the rent money will go into an installment payment for the car or house if you choose to buy it (it's sure a good way to own properties, right?).
3. Private Money Lenders
Private money lenders are also a type of creative financing.Take a scroll through your mind and think of someone you know or maybe a group of friends who are willing to help you with the capital you need to fund your business idea or whatever you want to use the money for.
These individuals, termed "private money lenders," can be of help to you when you've had a "no" from banks or when you're in need of the money urgently.
Not only will they be able to provide you with the capital, but they are also most likely to have less steep terms of repayment compared to banks.
4. Joint Ventures and Partnerships
Think of this type of creative financing as two friends or colleagues who team up to work on a project.In the same way, you can team up with or form an alliance with another business to help you achieve your goals.
This is where components like business proposals or strategic partnership managers come into play.
By entering into a partnership, you both will have access to and share in your resources, knowledge, experience, expertise, profits, and risks.
5. Crowdfunding
Another type of creative financing is crowdfunding. This is a very common way to raise funds for your business idea or anything else that you may have in mind.It allows you to ask many people in your circle, like family and friends, and also strangers online, for money to help support your million-dollar business idea.
This offers you access to money you don't need to pay back.
Maximizing Returns with Creative Financing
What better way to maximize returns with creative financing than to be a source or a creative financier? Let's revisit the different types of creative financing.Each of the types we discussed in this article, from seller financing to lease-to-own financing to crowdfunding, etc., all have their own return potential that they can generate if invested in.
For instance, when purchasing properties, you can leverage seller financing so you can free up more capital, which you can then use to invest in other businesses that can help you with revenue diversification.
If we're to consider how to yield maximum returns through private money lenders, you could borrow money from them and make good deals that favours you based on time and interest rates.
Because you can get access to money through this channel faster than from a bank, you can use the money to harness investment opportunities that are time-sensitive, thereby maximizing your returns.
The list can go on and on, and more instances can be cited, especially by investing in the different types of creative financing available.
But above all, what is most important is knowing how and when to use creative financing to maximize your returns and empower your business growth.
Conclusion
Creative financing remains an alternative method through which you can get money to fund a business idea, project, or even purchase a property.It offers both flexibility, tailored solutions, and faster decision-making if you make use of it. This alternative means of sourcing funds comes in handy when you need capital urgently.
When used in the right way, by making appropriate investments in the different types of creative financing, you will not only maximize your returns but also have the opportunity to empower your business to grow.
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Finance