Especially during this Recession, businesses need to view alternative forms of business finance to fund their finance requirements. There are a lot of options out there. Here are some to consider: joint ventures, strategic alliances, venture contract funding, venture capital factoring, hard money, mezzanine finance, bridge finance and franchising.

Before approaching a business funding sources make sure you have good  Funding Business Plan and  Loan Packages in place.

If you don’t, consider hiring Business Consultant to help you develop these all important documents, or if you do, consider hiring a consultant to insure the documents are up to snuff.

Obtain Business Funding Through Joint Venture and Strategic Alliance Relationships

• May obviate the need for other sources of Finance.
• Shared resources, at a lowered cost and lower risk.
• Understand distinctly the Opportunity Lost Value if pursued as separate entities.
• Carefully evaluate:
  • Each party’s objectives
  • Likelihood of Success
  • Appropriate Structure
  • Terms
  • Roles
  • Determine if the Relationship is preferable to financing the deal independently.

• Evaluate the Following Key Elements of a Joint Venture:

  • Objectives
  • Anti-Trust Issues
  • Resources
  • Funding
  • Technology
  • Management & Personnel
  • Location & Logistics
  • Corporate Culture Fit
  • Form of Relationship
  • Control
  • Exit
  • Termination
  • Liquidation/ Liquidity Vehicle
  • Buy-Sell Agreement

Venture Contract Funding and Venture Capital Factoring

• Leverage the contracts and commitments you have from existing customers to obtain cash. Quick turnaround funding.
• Expensive terms, but temporary duration.

Hard Money  ~  Bridge Finance  ~  Mezzanine Finance

• Often Real Estate based but can cross collateralize into a variety of Assets (personal & business).
• Higher Interest Rates; can have an Equity Participation component; can obtain funds in a few days to a month; the terms of the loan can be very limited (30 days to a year).
• Less red tape; easier underwriting; stream-lined process.
• Contingent on Appraisal / Valuation of Quick Sale Value.
• Hard Money & Bridge Finance often require strong owner equity in the deal (20-30%).
• Mezzanine Finance helps you leverage a higher LTV/LTC (80-95%), is equity based and has a high interest coupon.
• Experience and Track Record is a must.
• Consider them as short-term Rent Money.
• Needs to be a moneymaking deal to support the expensive terms (Interest Rates 10-18% with Equity Sharing in some instances).

Obtain Funding Easier with Franchises

• Does the Franchise offer Coop Purchasing?  This will help to free up money by driving down costs.
• What discounts can you obtain through the Franchise?  i.e. Software Purchases.
• The Name Brand of a Franchisor can bring credibility and trustworthiness to the table when you are negotiating a Bank Loan.  i.e.  Is your Franchise a bankable brand?
  • Especially applicable during bad economies when Commercial Loans are especially hard to obtain.
  • Don’t forget about using the SBA Guarantee to trim back the Bank’s risk.

About The Guest Blog Writer – Frank Goley

Frank Goley has an experienced background working with small and medium size businesses as a business consultant, business turnaround consultant, business plan writer, business plan expert, small business consultant, business coach, business plan consultant, marketing consultant, business planner and online marketing consultant, and seo consultant for ABC Business Consulting. He has been helping companies to succeed for many years. Frank wrote his first business plan over twenty years ago. He is an expert in developing business plans, marketing plans, funding plans, strategic plans, turnaround plans, web marketing strategies, and project specific business plans. Frank is the author of a business plan book, The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning, and he has over 150 published articles and e-books on business success strategies. He also writes the Business Success Strategies Blog and publishes the Business Success Newsletter.