Beyond the Banks: Smarter Ways to Finance Your Business
Rising business costs, interest rates and late customer payments are putting real pressure on Australian businesses. In fact, nearly one in four SMEs (small and medium sized enterprises) report struggling to secure finance from major banks.
With fewer traditional options available, more business owners are exploring alternative ways to raise capital. According to ScotPac's SME Growth Index, 55% of Australian SMEs now prefer non-bank lenders for business investment, up from just 7% in 2014, while only 30% still plan to use major banks.
7 Smart Capital Raising Strategies
If you're looking to boost your business cash flow or create a financial safety net, here are 7 capital raising options worth considering:
1. Refinance Business Equipment and Assets
Rather than relying on your family home for security, asset finance allows you to leverage business-owned property, machinery, vehicles or equipment. This can free up working capital while protecting your personal assets.
Refinancing can also help consolidate higher-interest debts such as business credit cards or personal loans, often with the added bonus of lower interest rates, reduced fees and tax-deductible interest payments on business loans.
2. Unlock Cash with Invoice Finance
Also known as debtor finance or invoice financing, Invoice Finance lets you turn outstanding invoices into immediate cash flow. This is ideal for businesses with regular contracts and customer, but delayed payments.
Benefits include:
- No property security required
- Fast access to funds
- Improved cash flow to cover wages, suppliers and growth opportunities
Non-bank lenders often offer faster approvals and more competitive rates than traditional banks in this space.
3. Business Loans from Non-Bank Lenders
A Business Loan is often the first port of call when seeking funding. Non-bank lenders provide business loans with flexible terms and quicker approvals compared to many major banks.
Business loans can be used for:
- Growth and expansion
- Equipment purchases
- Hiring staff
- Managing cash flow
Business loans typically offer lower interest rates than credit cards, making them a cost-effective financing option.
4. Crowd-Sourced Funding (CSF)
Crowd-sourced funding (CSF) enables your business to raise capital from a broad base of investors, usually through an online platform. Investors contribute small amounts in exchange for equity in your business.
CSF is a regulated form of fundraising introduced in Australia in 2017, offering investor protection measures while helping businesses access alternative funding.
Advantages include:
- Reaching a wide pool of potential investors
- Raising brand awareness
- Receiving direct market feedback
Keep in mind, running a CSF campaign requires time and effort to secure backers and meet compliance requirements.
5. Angel Investors
Angel investors provide capital to early-stage businesses in exchange for equity. These individuals are often successful business owners or retirees looking to support promising ventures.
Alongside funding, angel investors can provide mentorship, advice and valuable business connections.
Finding the right investor can take time, requiring networking and pitching, but for the right business, can be worth the effort.
6. Venture Capital Funds
Venture Capital (VC) funds are groups or superfund-backed investors that finance businesses with high-growth potential. In exchange for equity, VC funds can inject substantial capital and strategic expertise.
While venture capital can accelerate growth, it does come with conditions:
- Investors may seek influence over business decisions
- The funding process can lengthy and complex
Successful VC partnerships depend on aligned goals and clear communication.
7. Family and Friends Funding
Many small businesses turn to family and friends for support, especially during tough times. This form of funding often comes with flexible repayment terms and minimal paperwork.
However, it's important to formalise the arrangement with a written loan agreement to avoid misunderstanding and protect personal relationships.
Which Capital Raising Option is Right for your Business?
Strong cash flow is essential for stability and growth. If bank loans aren't available or don't suit your situation, it's worth exploring alternative business finance options. Whether it's refinancing business assets, unlocking cash through invoice finance, securing a business loan or seeking investment from alternative sources, the right solution depends on your business's size, goals and cash flow needs.
Talk to RLA
At RLA, we're more than just brokers, we're your business finance partners. With access to a wide panel of both bank and non-bank lenders, we help businesses across North Queensland and beyond secure tailored funding solutions that match their needs. From preparing and submitting compelling applications to managing the approval process and follow ups, we handle the heavy lifting so you can focus on running your business.