Many aspiring entrepreneurs have an idea for their business but lack the capital to actually start it. Brand-new businesses are often turned down for bank loans, and even if your business is established, funds can still be tough to secure. So what options are left for someone aspiring to be a small business owner?
Here are six options beyond bank loans for financing your startup.
Online lenders have become a popular alternative to traditional business loans. These platforms have the advantage of speed, as an application takes only about an hour to complete, and the decision and accompanying funds can be issued within days.
Angel investors invest in early-stage or startup companies in exchange for a 20 to 25 percent return on their investment. They have helped to start up many prominent companies, including Google. Mark DiSalvo, CEO of private equity fund provider Semaphore said, “You are likely to get an investor who has strategic experience, so they can provide tactical benefit to the company they are investing in.”
Find out what makes angel investors fund a business here.
Venture capital is money that is given to help build new startups that are considered to have both high-growth and high-risk potential. Fast-growth companies with an exit strategy already in place can gain up to tens of millions of dollars that can be used to invest, network and grow their company frequently.
Learn more about venture capital here.
Through this process, a service provider will front you the money on invoices that have been billed out, which you then pay back once the customer has settled the bill. This way, the business can grow by providing the funds necessary to keep it going while waiting for customers to pay for outstanding invoices.
Crowdfunding on sites such as Kickstarter and Indiegogo can give a boost to financing a small business. These sites allow businesses to pool small investments from a number of investors instead of having to look for a single investment.
Make sure to read the fine print of different crowdfunding sites before making your choice, as some sites have payment-processing fees, or require businesses to raise their full stated goal in order to keep any of the money raised.
Check out some emerging trends in crowdfunding here.
Businesses focused on science or research may be able to get grants from the government. Recipients of these grants are required to meet federal research-and-development goals, and have a high potential for commercialization.