The biggest challenge in any startup is always funding. It does not matter whether you have an award winning product, or the next big invention if you don’t have the money to bring it to market.
A lot of budding entrepreneurs have seen their dreams waste away due to lack of capital and the tightening lending conditions in mainstream banks has not made things easier.
However, despite these challenges, getting capital for your startup through alternative sources is possible.
Here are some good alternative lending options that you can consider when funding your start-up:
1. Venture Capital
Venture capital is perhaps the most popular source of funding for emerging start-ups but it has a number of challenges. With venture capital, you will get an investment from a venture capitalist in exchange for a specific portion of your company.
Venture capital firms are professionally run companies and will only invest in startups that have shown enough potential to blow over and become big in the future. However, the challenge is that sometimes you may end up giving up a significant share of your business – a decision that you might regret later.
2. Peer To Peer Loans
Although this is an option often associated with personal loans, it is now making its way to modern business lending. As a start up, you can definitely explore peer to peer lending firms that are ready to lend money to businesses.
Peer to peer loan works very easily, you get an investment from an individual or a group of individuals and they will own a portion of your business. Unlike venture capital firms, it is actually easier to negotiate equity demands with an individual and in the end, you will not have to give up a big percentage of your company in order to get the funding you need to grow.
If you feel that indeed you have a good product that can sell, you can raise money through Crowd Funding and preorders. There are so many startups that have used Crowd Funding platforms such as Indiegogo and Kickstarter to raise starting capital.
The challenge is that you need to have a very good product and a strong public relations campaign in order to attract the money you need. In addition to this, you are allowed to raise as much money as you want, but it can be difficult to arrive at the target within a limited time frame.
4. Personal Credit Lines
It is not difficult to acquire this loan as you qualify for it on the basis of personal credit efforts. You can get it easily even if you do not have any history. There are several startups which have managed to build a solid financial base by getting secured personal line or credit card loans.
Personal credit lines are a good option because they allow you to retain the control as long as you are making minimum payments.
5. Purchase Order Financing
One of the common problems that startups face is their inability to accept large orders because of lack of financial support. Manufacturing and delivering the products requires cash.
You can solve this problem by relying on purchase order financing. The companies offering PO financing give the required cash in advance to the supplier. It allows a new business to complete the transaction process and it also helps in kick-starting the cash flow of the startup.
5. Micro-Finance Loans
A lot of people tend to confuse Microfinance loans with normal bank loans. The truth is that they are quite different. Microfinance loans are aimed at small businesses and will come at much more reasonable terms compared to normal bank loans.
In addition to this, the loans are offered by microfinance institutions and will offer a good option to secure funding for your startup.
If your startup is commercial based, make sure to do searchical SEO so that your site is optimized for e-commerce to generate sufficient initial traction and cash flows. Generating initial cash flows without external support can be biggest proof of your success as a new start up so doing focus on this too.
Finding firms or individuals that lend money to businesses is now possible and the simple options above should be quite ideal for any new business.