The traditional sources of funding, for companies that don’t expect to grow enough to pay 50 times investment in two years (a tech angel funder’s demand) or 10x in two years (venture capital’s demand), while giving up control of their business, are:
a. Factoring: Business factors deal with multi-billion dollar funds like Bibby (http://www.bibbyusa.com/) to buy your accounts receivable (invoices where you’ve delivered the goods or done the service work) or accounts payable (purchase orders for goods or work). Availability of funds is about 75% for p.o.’s and about 90% for a.r.’s, cost is 1.5% per month or so for funds if the factor collects (you have to guarantee full payment to the factor), plus the referring broker cost, of about 4%. Depends on customer credit, not yours, so if you have a product or service and can get orders from AAA credit or other paying customers, there is no limit on what you can sell, if you have a short cash cycle.
b. SBA Export Express: The US Small Business Administration and the Export-Import Bank of the United States can give you up to six months of credit based on international orders. The annual rate is the SBA loan rate, which is capped at 2.25% above prime. Consult SBA regional offices for which SBA lenders participate, since banks write these loans.
c. Private Equity: Any group of people with $1 million or more in assets besides their individual houses can be parts of a private round, though, so think about encouraging your prime customers or supply sources to invest in your business. There are, for instance, over 60,000 companies with $1 to $50 million in sales in the Chicago metro area, any one of which CEO’s could be such an equity source, if properly introduced. Most business deals are done with people you know or can meet personally. That’s why most equity deals are private. There were more than 800,000 private deals in the US per year in one SBA study I read last year (as opposed to p/e fund deals like VC investments, see lower numbers in the MoneyTree Survey or later stage rounds like the 318 4Q 2013 p/e fund deals estimated to have happened by the Private Equity Growth Council). That compares to less than 7,000 venture capital deals in a very busy year, and less than 500 initial public offerings. Private deals occur in very non-transparent markets, as opposed to those for venture money or publicly traded firms, so estimates of totals, terms, and sources vary widely.
For data on all major sources of small business funding, see http://www.sba.gov/sites/default/files/2014_Finance_FAQ.pdf