The Business of Creative Financing

Personal Loans  Business Loans  Alternative Financing  Creative Financing  

There used to be a mere few options available to get financing for major ventures. The choices were traditional borrowing from a financial institution or from family and friends. Today, there are unlimited ways to get financing for any purpose. Creative financing has opened the doors for consumers who want or need an innovative way to get money to fulfill their dreams.


Creative financing topics:

  1. The Need for Creative Financing
  2. Creative Advantages
  3. Financing Business Loans
  4. Buying a Home
  5. Creative Financing for an Auto Loan


The Need for Creative Financing

Creative financing was initially introduced to give people with bad credit a chance to make purchases. Mortgages, auto loans, and business loans became viable options for borrowers who were unable to close a deal with a bank because of a low credit score. Over time, consumers were able to make timely payments and build their credit to qualify for regular financing.


But as decades passed, creative financing grew into a choice even for people with good credit. Innovative financing techniques that save time and money have become an attractive alternative for out-of-the box thinkers who want to stretch their dollars or spread them out over several ventures. Creative financing involves putting together a plan that turns a rejection into an approval.


Some strategies used are:

  1. Arranging for longer term loans to lower payments.
  2. Offering unique payment plans such as weekly or bi-weekly payments and automatic debit withdrawals.
  3. Getting a third-party lender involved that has resources to accept unusual repayment terms.


The ultimate goal is to make financing possible, regardless of credit history. There are endless reasons why people find the need to finance. This article will discuss some of the most common creative financing categories.


Creative Advantages

As stated, creative financing is not just for people who can’t get prime rate financing. Business owners and investors also utilize unique financing opportunities for special advantages such as:


  1. The flexibility and speed of creative financing.
  2. Real estate investors do not have a limit on how many homes they can finance through property owners, unlike traditional bank mortgage limits.
  3. Terms are much more negotiable in a creative financing transaction.
  4. The likelihood of developing business relationships is greater with certain forms of creative financing.


Many investors believe that overall, innovative financing is less risky for all parties. In any case, industry experts agree that creativity is a larger resource than cash when it comes to finances.


Business Loans

Businesses need a steady flow of money to run daily operations. Inventory, equipment, and payroll are just a few responsibilities of a successful business. Established businesses very often take out loans using creative financing to meet a temporary situation such as a seasonal rush. However, their chances of getting approved for a traditional business loan are greater than they are for a start-up or brand-new business.




Beginning entrepreneurs may have not had time to build up their business credit and get turned down by large banking institutions. More often than not, they have exhausted their personal savings and maxed out any credit cards before they get the business off the ground. But because they have the same needs (or even more) than established companies, it is imperative they find the cash to keep the doors open.


Seasoned business owners and newbies have obtained financing using creative strategies such as:

  1. Microloans are usually approved by banks as seed money for new companies. If a bank won’t approve a large loan, it is possible to ask for a microloan, which is usually less than $35,000.
  2. Local incubator groups. Also known as accelerator groups, these are private and public partnerships that offer new businesses loans in addition to networking opportunities.
  3. Online lenders are extremely popular with business owners who want a financing alternative because of the ease and speed in which loans are processed and disbursed. Some analysts predict that online lenders will approve up to $500 billion in loans by the year 2020.
  4. Invoice advances are offered by service providers who loan money up front which is due to the company. Repayment is made when the customer pays the bill.
  5. Venture capitalists invest money in startups and fast-growing companies that have an exit strategy in place. They focus on specific categories and offer advice to the business to help it grow a profit. Venture capitalists expect a return on their investment within 3 to 5 years.


These are just some unique ways that businesses find the money they need to stay afloat. Many other innovative financing resources are available. Business owners often form groups in which they share strategies and ideas that have proven helpful to their companies.


Buying a Home

Practically anyone can own a home, even if they have poor credit. With determination and some creative financing, homeownership has become a reality for millions of people. How?


Some tried and true home loan alternatives include:

  1. The seller (owner) finances the buyer rather than the bank. This method can be either outright financing or contract financing, which means the owner retains the deed to the home until it is paid in full.
  2. Assumption payments allow the buyer to take over the seller’s payments, usually without a down payment. It is often used when a seller has to quickly sell a home and has financing already in place.
  3. Lease options let buyers pay rent on a house for a certain amount of time. Part of the rent goes toward the purchase of the home. When the lease ends, the buyer can buy the property.


Private mortgages and short sales are other means used to secure home loans. Some home seekers borrow against their retirement accounts to finance their mortgage. This choice can come with undesirable consequences, so it is advisable to get all the facts before going this route. A little digging can uncover many other creative financing choices.




Creative Financing for an Auto Loan

The ideal way to buy a car is to pay cash. But in reality, most people are not willing or able to put down such a huge chunk of change for an automobile.


But borrowers are getting more savvy at making a way to finance a vehicle in unconventional ways, such as:

  1. Credit cards. There are some credit card companies that now offer auto financing, but it is also possible to put a down payment or even part of the price of a car on a major credit card.
  2. Homeowners can consider taking out a home equity loan to buy a car if the situation is hard pressed. The key is to proceed with this type of auto loan creative financing with extreme caution since nonpayment for a car can mean losing a home.
  3. Dealer financing is an option for people with bruised credit since many dealerships have programs in place to sell to customers who can’t get traditional auto loans.
  4. Lease with the option to buy a vehicle is another way to finance a car.
  5. There are tons of auto loan companies online with a variety of financing programs from which to choose.




Even with so many avenues to get approved for financing, it is important to remember that creatively structured loans must be paid back on time, just like any other type of financing. In addition to even worse credit and collection activity, nonpayment can result in loss of property with secured loans like auto financing and mortgages. But in the majority of situations, creative financing is the key that unlocks the potential for consumers to reach their financial milestone.

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Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.