Alternative capital generally refers to capital achieved through unconventional means and is usually used by small business owners. In the modern business world, there are many sources for alternative capital, but the competition is fierce. The key to securing alternative sources of capital is to motivate and interest prospective investors by presenting a stable business plan that focuses on the potential growth of the business.
The most common type of alternative capital is a private investor such as a wealthy family member or businessperson and others with the means and willingness to invest in start-up companies. Private investors usually seek a portion of the business profits in exchange for their financial assistance. However, many start-up business owners do not know where to find information on private investors or how to go about securing a deal for alternative capital. One resource on how to locate a private investor is International Capital Resources. This agency specializes in assisting small business owners in finding alternative sources for capital.
Other types of alternative capital include Collateralized Debt Obligations (CDOs), subordinated debt, secured debt, and joint ventures. These investments can help minimize the risk of capital loss while increasing available funding. While these alternatives may increase financing costs, they also have the ability to enhance a business’s balance sheet and maintain net interest by opening up a substitute to common equity.The key to choosing the best alternative capital source is to decide what the needs of the business are and to weigh the advantages and disadvantages of the various options available.
Alternative capital online generally refers to the process by which a business owner uses Internet research to obtain non-traditional funding for a business. Individuals usually turn to alternative means of funding when they have been denied financial assistance from traditional lenders, such as banks.A small business investment company (SBIC) is one type of alternative capital online. These organizations are part of the Small Business Administration, and they help high-risk individuals get the money they need to start or maintain a business. To be eligible for funding from an SBIC, a business must have at least five hundred employees, have a net worth that does not exceed eighteen million dollars, and have a net income of no more than six million dollars. An SBIC may not supply as much capital as other resources, but their top priority is to help small businesses excel.
Another source of alternative capital is subordinate debt. Also known as a subordinate loan, these debts have a lower priority on the assets of an individual, which means the individual can receive funds without a first lien against his or her assets. Agencies that provide subordinate loans typically rely on the projected cash flow of borrowing businesses. Repayment plans for subordinate debt last five years or more, and the borrower usually only makes interest payments for the first couple of years. The majority of these loans are used in conjunction with secured loans as a means to generate maximum cash flow for a business.