5 Tips for Financing Your Business
Setting up or expanding your business can be a very daunting affair. A point often comes when you need to source help from outside. Financing is one such area.
Getting folks to open their wallet for you is no easy feat. Lucky for you there is no scarcity of ways to go about this, though, ranging from conventional methods like bank loans to new and improved ones like crowdsourcing and fast online loans. Lack of funding should never be the reason you give up on your endeavors. Take a look at how to navigate this prickly challenge.
- Private Equity and Hedge Funds
The less-than-friendly evaluation methods banks now employ to dispense loans is one of the reasons that led to the steady incline of private equity and hedge funds. While private equity and hedge fund lenders are usually very lax in their criteria, their interest rates can be quite steep, often amounting to twice as much that of traditional lenders.
- Equipment Based Financing
Equipment based financing operates on the same principle as that of an automobile loan. Let’s say you want funds to purchase a photocopier. The photocopier itself will be the collateral for the loan and you would be absolved of putting up any extra collateral.
It is not only easy but very low risk as well. The only catch would have to be the amount you are qualified to take out. If you have a good business history coupled with a great credit rating you have no reason to fret. Keep in mind that these factors will also determine your interest rate.
Crowdsourcing avenues like Indiegogo and Kickstarter are revolutionizing the business financing industry. In 2014 alone this avenue amassed a whopping $9.46 billion (with a B) in North America. In light of this, the industry enjoyed an overwhelming growth rate, coming in at 145%. Some of the lucky projects that reaped considerable benefits include The Dash as well as a gaming VR headset that Facebook acquired.
- Small Business Loans
Small business loans, or SBA’s, have the backing of the U.S. Small Business Administration. To qualify you to have to be a small business as defined by the government and also need to have been rejected by a bank. Kind of the perfect solution for struggling businesses, wouldn’t you agree?
Other countries besides the U.S. offer loans and grants for small businesses, too. For instance, the government of Australia states on its website for small business loans that “new small business loans will jolt the economy.” Funding for small businesses is available from the European Union, as well.
- Angel Investors
Angel investors are just that: angels who step in when venture capitalists, friends and family fail to pitch in. In contrast to venture capitalists, these folks put in their own money as opposed to pooling funds.
They often step into the business in the early days in exchange for cash value at some point in the future, or for shares or equity in the company. Companies like Yahoo, Costco, and Google have received the aid of angel investors and thrived because of it.
The tradeoff is that angel investors often ask for a pricey return on their investment, sometimes amounting to as much as 25%. Their saving grace is the wisdom and experience they bring to the company with them.
While raising funds for your business can be one of your most challenging hurdles, with creativity, imagination and courage you will find the funding you need to finance your business and realize your dreams.