Business owners continue to seek alternative financing methods, and experts say there are plenty of possibilities for the savvy entrepreneur. According to Wendy Posnock-Woock, president of Acceptance Corp., Inc., a financial services firm, one of the most common forms of alternative financing is asset-based lending. "Basically, if the company has an asset, be it receivables, inventory, equipment, etc., there are firms that will lend almost exclusively on the value of that asset," she explains. Posnock-Woock says that although this option is more expensive than bank lending, it can be utilized by a company without proven cash flow and profitability, or with a poor credit history.

David Evanson, author of "Where to Go When The Bank Says No: Alternatives for Financing Your Business," says royalty financing, or selling a piece of the revenue stream, is another good option. "Rather than selling pieces of a business, why not sell what investors really want - a hunk of cash flow," says Evanson. "Royalty financing helps companies preserve their equity. Plus, the monthly or quarterly return that it provides is attractive to a much larger number of potential investors." Jacalyn Goforth, leader of the Middle Market Group for PricewaterhouseCoopers calls this financing method a strategic partnership and advises, "Consider a company that may strategically need your product. They may well be willing to put up some funds for future product rights with a royalty stream to you."

Evanson also suggests taking an alternative path to an IPO. "Certain exemptions to state and federal securities laws make public offerings viable for tiny companies at a fraction of the cost associated with conventional deals," he explains. "For a small company with a big future, in need of $1 million or less to get there, an alternate IPO may be the path to take." Using the Internet by listing on ACE-Net is another option. "SBA-sponsored ACE-Net is an Internet-based service that matches capital-hungry entrepreneurs with accredited (read: wealthy) individual investors," says Evanson. "With a newly streamlined application and a modest fee, entrepreneurs have nothing to lose by trying this route."

Finally, Evanson suggests affinity groups as a financial resource. "One manufacturer of homeopathic medicines raised $500,000 by selling stock to homeopathic enthusiasts," he explains. "People who like a product or service are more likely to be attracted to it as an investment. A company may want to explore its strong ties to its customers, community or vendors."

George M. Dawson, business financing consultant and author of "Borrowing to Build Your Business; Getting Your Banker to Say 'Yes'," says it is important to remember two things when seeking alternative financing. He says most of the alternative sources have a specific agenda (job creation) or a target audience (minority groups), and the applicant must fit specific guidelines. Dawson also advises, "All of the sources want their money paid back; otherwise they will go out of business. There are no giveaway programs," he insists. "Consequently they all gather information and analyze the deal with similar methodology. Regardless of where you go and how much or how little you need, prepare as if you are asking for millions from the tightest bank in town."

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