Alternative For Banks As Financing Method For Startups

As an eager entrepreneur, when you decide you want to start up your own business. However, you immediately run into the problem of financing your startup to get it on its feet and if you do not have enough capital, you will have to turn to the bank for a huge loan.
Why the bank won’t work:
Since you have absolutely no previous records of financial success and you are starting your first business, a bank will be very hesitant towards lending you a huge sum of money to get your business startup from the ground. And so, you are faced with the decision to look for other sources of funding, and ideally, you will choose the ones that have been successful with previous business owners. Some common alternatives to the bank include but are not exclusive to:
  1. Personal Relationships: Borrowing from friends and family have always been one of the major choices and will continue to be the top choice as it is the one that takes the least amount of effort.
  2. Peer-to-peer lending: A method that has been around for years, peer-to-peer lending involves a group of people that lend money to each other. Although it is similar to a bank, both are easier and hassle-free to get into thereby allowing your business to kick-off sooner than you would with a bank loan that involves heaps of paperwork. Moreover, both are beneficial to investors, due to higher interest rates, and borrowers’, because they have to pay much less than they would to a bank.
  3. Crowdfunding: Crowdfunding has risen massively in popularity recently with websites such as Kickstarter and Indiegogo fueling the latest innovations from creative entrepreneurs looking to start small businesses. These sites work by allowing large number people interested in a single project to fund its much larger pool or goal. The sites do take their cut from the total funds, but it is more accessible than loans provided by the bank.
  4. Angels: Angels have had numerous success stories in the past, notably Google and Facebook. Angels are experienced and wealthy individuals, who, for a percentage of the company’s ownership, fund the early stages of the company. Their main advantage is their knowledge about the business world and can provide important insight, thereby helping you raise your business. Therefore, Angels serve as a strong ally to the startups and make the business seem more credible.
  5. Venture Capitals: Similar to Angel investors, but, instead of a single person, they consist of groups of investors. Renowned for funding businesses associated with high risks, but also rapid growth, they provide not only financial support, but much-needed experience and knowledge of the investors involved. Although they expect a large percentage of equity, the advantages associated with a financially established group of individuals backing your project are well worth it.
Rundown:
Each of the different alternatives comes with their own benefits and problems. A smart entrepreneur manages to secure funds from more than just one source, so it is imperative to explore all alternatives available.
For more info, please visit: Charles K Carillo

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