Tougher lending criteria force entrepreneurs to look at alternative funding

Unemployment numbers are staying over 25%, and the mining sector has been seeing strikes and fighting. To make matters worse, the nation's economy is affected even further by the falling gold and silver prices seen in the commodities market so far this year. For small businesses that are looking at financing choices, traditional options may not be available right now.

For many people, this is the end of their dream. New businesses fail to get started, and existing businesses fail to thrive or expand. For the savvy business owner, however, there are a number of options to fall back on when traditional lenders are not willing to lend.

Many times, one of the best places to look for funding is through old business colleagues. This isn't just about asking friends and family for money. This is about incorporating people with real-world experience in your industry to help and partner with you on your new project. After working for years in the marketing industry you want to start your own firm? There are few better people to ask than a former colleague who can oftentimes offer not only funds, but also useful experience and guidance.

Peer-to-peer lending networks

Around the world, websites enable private individuals to lend funds to others who are searching for non-traditional loans. These peer-to-peer lending networks have taken off in popularity in the United States in recent years following traditional lenders having imposed much more difficult restrictions on obtaining loans following the country's economic recessions. Sites such as Proper and Lending Club aren't small time enterprises either - in 2012 Lending Club handled over US$800 million in loans. In 2013, they are hoping to increase that number to over US$2 billion.

In South Africa, the market for personal lending is not quite yet as large as it is overseas. This is likely due to strict government regulations and laws that affect such services. Just this past year, however, RainFin, South Africa's peer-to-peer lending service opened up and has been providing numerous loans to those in need. Borrowers can access between R100 and R500,000 to suit their needs.

This is a win-win situation all around as companies are able to acquire funding that they couldn't from conventional banks, and private investors are able to receive a higher return on their funds than they could in many other investment avenues such as stocks and bonds.

No credit check short-term lenders

Another option that can be used when you need money right away, often for immediate cash flow issues with your business, are lenders which offer short-term loans with no credit check. These companies don't charge the same rates as micro-term payday loan lenders, which makes them more ideal for loan repayment terms of up to twelve months. In addition, there are some lenders who will even loan you up to R120,000 without any kind of credit check.

There are negatives though - these short-term lenders do charge much more interest than their traditional counterparts and may not be a good choice for your company's long-term survival. Think of them more as a crutch that you are able to lean on during the direst of financial situations.

Thanks to more stringent lending criteria than we've seen in years, it has become very hard for many individuals and businesses to obtain traditional loans. If you're trying to fund a new business venture, or attempting to patch your cash flow to keep your current venture solvent, scouting out alternative funding solutions may be necessary. Meeting with old co-workers who have real-world experience in what you're trying to do may be your best bet for long-term capital, but the internet has made peer-to-peer lending networks and short-term lenders available at your fingertips for any of your loan needs.