Cutting-edge financing services offer alternatives to bank loans


MicroVentures, Kabbage, RocketHub and Pawngo offer unique financing options, each suited for a different type of small business. (J.D. HARRISON)

Need capital to start a new company, expand your inventory or invest in new computers? Not so long ago, small-business owners had a rather limited number of paths to financing, and most of them ran through the bank.

But technology has changed all that, and several new services are available to help them secure funding, many of which tap the power of the Internet to connect entrepreneurs with investors and financial institutions. Some are best suited for start-ups seeking to get off the ground while others cater to established businesses seeking to grow.

If a bank loan isn’t the right path for your company, here are some financing alternatives to consider:

MicroVentures: Securities brokerage

Started: January 2011.

Funding range: $150,000 to $500,000.

Rate: 10 percent.

Good fit for: Early- to mid-stage firms specializing in mobile, social and green technology (plans to expand to financial and professional services firms).

Process: The MicroVentures team reviews and publishes approved funding requests online for consideration by its roughly 2,100 member investors, who can then invest between $1,000 and $30,000 in exchange for equity in those companies.

Others: Funding Store, CapLinked.

Pawngo: Online pawning

Started: August 2009.

Funding range: $10,000 to $100,000.

Rates: 3 percent to 6 percent.

Good fit for: Small-business owners who need to fill a cash-flow gap or make an urgent repair or investment in their business.

Process: Business owners can secure short-term loan against their assets (anything from jewelry collections to antiques to gold coins) to be repaid within six months.

Others: PawnQ.

Kabbage: Cash advance

Started: October 2010.

Funding range: $500 to $40,000.

Rates: 2 percent to 18 percent.

Good fit for: Small businesses that sell goods on Web-based marketplaces such as eBay and Amazon.

Process: Kabbage analyzes data concerning sales, inventory and social engagement to offer businesses cash advances against their sales, which are repaid within six months.

Others: Merchant Capital Access.

RocketHub: Rewards-based crowdfunding

Started: February 2010.

Funding range: $2,000 to $25,000.

Rates: 4 percent to 8 percent.

Good fit for: Young companies with exciting or exclusive rewards at their disposal and a strong social presence online.

Process: RocketHub members contribute various levels of funding to projects and companies in exchange for goods or experiences.

Others: Kickstarter, IndieGoGo, Crowdfunder.

Know of others? Did another service work for your company? Please share your funding recommendations in the comments below.

Follow On Small Business and J.D. Harrison .

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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