Four Sources of Alternative Funds (Businesses/Start-ups)

The Wall Street Journal ^ | September 17, 2008 | Colleen Debaise

[2ndDivisionVet]

WHEN SANDY CORSO launched PeacefulCompany, a web site that sells products to soothe the mind, body and spirit, in 2002 her friends and family were skeptical. And so, too, were potential lenders. "The banks thought I was crazy, and they would not give me a loan," says Corso, of Madison, Conn.

Now, six years later, Corso's company posts $1.3 million in annual sales (her current best seller is the "neti pot," a container that cleanses sinus cavities), enough to win the respect of her former naysayers. But banks? Still a no-go, which Corso attributes to two factors: the credit crunch, and her company's occasional cash-flow problems. So she turned to a microlender (a not-for-profit that helps female entrepreneurs) and more recently, a private lender called On Deck Capital for some working capital. Alternative funding sources, she says, were "instrumental in helping me get this business off the ground."

It's often difficult for a newly-established business owner to get a conventional bank loan. Many entrepreneurs tend not to have strong enough personal credit or a long enough operating history to meet the five Cs of commercial lending -- character, capacity, collateral, capital and conditions. Now, as financial institutions tighten lending practices, many small and mid-sized business owners are finding it even more difficult to get their hands on funding.

But as Corso discovered: even if one lender says "no," another may say "yes." While a non-traditional loan or cash advance might come at a steeper price, the money can be a lifeline for a cash-strapped entrepreneur — and often, it's a better option than relying on a high-interest credit card or local loan shark. Here are alternative places to turn to for funding:

[2ndDivisionVet]

Sound like good tips, especially now.