Bank Won’t Fund Your Business? 4 Loan Alternatives To Get You Started
Businesses typically require some sort of collateral or proof of concept before funding their business venture. However, it is possible that you don’t have enough collateral or there aren’t a lot of businesses like the one you have envisioned that are being funded by bank loans. Brick-and-mortar businesses like a donut shop, for example, may be easier to get funded than your software innovation or online business idea. Because of this, more and more people are finding it challenging to get funded by the bank. If you know you have a million-dollar idea for starting a business but can’t convince any bank to lend you the money needed to get things started, don’t simply give up on your entrepreneurial dreams. In today’s business world, there are plenty of other alternatives you can turn to when seeking money to start a business. Rather than be discouraged because a bank said no to your loan request, consider these four alternatives.
When you work with venture capitalists, you can not only get the money needed to start your business but find your business taking off much quicker than you anticipated. An outside group that will get part ownership in your company in exchange for giving you your startup money, venture capitalists can also provide you with their years of extensive business knowledge, connections within your company’s industry, and much more. Venture capitalists invest in almost any business venture. However, they are becoming more and more popular with software-based companies. If you have developed or are developing software that will solve a problem for a large population of business owners, then it is likely that you can find a venture capitalist funding solution. However, these types of investures typically require some proof that your software is ready to be sold to business owners or is on its way to being ready. This means that you will likely need to do most of the development of the software before getting funded. If you have a contract that doesn’t allow you to own anything that you produce, such as a non-compete then you may need to get creative with this process to ensure that you don’t accidentally create amazing software that becomes the property of your current employer.
Similar to venture capitalists, angel investors do offer some key differences. For example, while venture capitalists usually want to invest in businesses that already show excellent chances of quick profits, an angel investor will be more willing to take a chance on more innovative and unique ideas. Also, an angel investor can act as your mentor, helping you limit the trial-and-error period new entrepreneurs always experience. There are companies that help you find these kinds of investors such as Pop Funding Solutions. Typically, these types of companies will look at what you have to offer and then find an investor who is interested in that type of product or service. Since angel investors typically involve themselves in your business to help it grow and transform into a profitable company, it is likely that you will need to agree to what type of changes and support you are willing to accept before making a deal with an angel investor. Additionally, some angel investors will require a certain amount of decision-making power for your future investment or business steps such as product or service changes down the road.
There are many crowdfunding sites such as Kickstarter or Indiegogo that enable companies to reach out to possible consumers directly to fund the production of their products. Gaining in popularity with more and more younger entrepreneurs, crowdfunding lets you pitch your idea online, then raise the money you need by pooling together numerous small investments from people who believe in you and your idea. This type of funding typically works best for physical products that people can purchase for their own use. So instead of investing in your company for a percent of your profit, they are investing in the company in exchange for the product itself. For example, there have been many successfully crowd-funded e-bike companies where the investor actually got an e-bike in exchange for the funding they put down. The campaign for getting the funding showed a prototype of the product that showcased how it works and how it is better or different than the current bikes available. Then, instead of paying for a part of the company, the investor gets a one-time investment return on the actual product. This can be helpful if you want to work with a factory for mass production and need the funds for your first order. The funding goes toward the order of the product from a factory. Then the investor gets the product for their funding, which is typically cheaper than the retail purchase of the bike. In addition to physical products, crowdfunding has also been successful for projects such as independent movies that can be viewed from a funder-only platform or even things like a digital book. In some cases, the person investing only gets access to a cheaper price down the road for the product and not necessarily the product itself. However, be careful as to how much money you are seeking for your crowdfunding goal since some sites require that you reach your goal before you can keep any money raised along the way.
Credit Cards and Personal Loans
As a final alternative method to get your business going, consider financing your efforts with credit cards or personal loans. Though you may face interest rates that are higher than you prefer, this will be a great way to get started quickly. If you don’t want to use your credit cards, personal loans may be another option. Offering lower interest rates and flexible repayment plans, these loans require no collateral.
Rather than put your fantastic business idea on the shelf and wonder what may have been, take advantage of these various loan alternatives. Remember, all it will take is finding one alternative financing avenue to make you your own boss.=
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