There are countless would-be entrepreneurs out there who are bursting with great ideas for their business, but don’t have the initial capital needed to get a functioning operation off the ground. Completely new business plans are often turned down by the banks, as you may have discovered yourself. However, this certainly isn’t the only way to give your business idea a capital injection and set wheels in motion! Here are some of the alternatives you may want to consider.
Online Lending
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With the internet being more accessible than it’s ever been before, online lending is now a hugely popular alternative to traditional business loans, and is growing all the time. Aside from being far more accessible, they also have an advantage when it comes to speed. Applications can take under an hour to complete, and the decision whether to approve it or not, along with the transfer of funds, may only take a few days. Obviously, this can be an issue for entrepreneurs who still have one or two holes in their business plan. By and large though, this form of lending has given entrepreneurs a greater degree of freedom and flexibility when it comes to those initial stages of their venture. Online lending is growing steadily, and some even expect it to overtake traditional business loans in the future!
Purchase Order Financing
This is another unique financial resource which established businesses can use to help them through strenuous periods of trade. As you’re probably aware, there’s always some degree of risk that businesses will grow too fast, and end up damaging themselves irreparably. If a company’s only been running for a short space of time, and the CEO or upper management decides to accept more orders than the business can realistically handle, then this can easily backfire and drive the whole operation into the ground. Purchase order financing was created in order to mitigate this issue. This funding solution for business is intended to keep the business ticking, and allow it to fulfil large orders which it wouldn’t be able to complete with its existing resources. You just forward the details of the order to the lender, they transfer the funds to your vendor, and you’re able to keep your promises!
Angel Investors
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Although this form of funding has been around since the noughties, it still remains relatively unknown and unpopular compared to conventional business loans. While reaching out to an angel investor certainly isn’t for everyone, this kind of funding could be the perfect way for you to get your business moving, and avoid the clutches of the banks! Angel investors pump capital into a business in its earliest stages. In return, they’re owed a 20-25% return on their investment. Various prominent companies, such as Costco and Google, have been kick-started by angel investors. There’s also an added advantage in that angel investors can potentially become more involved with the business’s future strategy, and offer some invaluable support. It’s not hard to find an angel investor who has some kind of experience in the upper echelons of a business, and will be able to pass on their strategic experience, giving you an edge over the competition.
Venture Capitalists
“Venture capital” is a unique kind of loan, referring to the money that’s given to start-up operations considered to have both huge potential for success and huge potential for failure. Through venture capitalists, fast-growing businesses which already have an exit strategy can obtain tens of millions of dollars, which can then be used to network, invest, and generally push their company even further. Again, like angel investors, venture capitalists can offer a certain strategic advantage to your company. Many of them only work within a specific industry or niche. This means that they’ll be able to offer you helpful advice and cautionary tales from ventures they’ve dealt with in the past. Even if your business strategy isn’t looking too promising, many venture capitalists will be willing to help you set out a revised plan that will maximise your chances of success. The only issue with venture capitalists is that they don’t usually demonstrate a lot of company loyalty, and will generally look to recover their investment, with the return, within a three to five years. Still, if your business can go one of two ways and you think it’s worth the gamble, venture capital could be a great option for you.
If you thought that the bank was the only way to get your business up and running, I hope that this post has helped you find a great alternative.