When it comes to starting up a business, securing the money you need to get things up and running isn’t always as simple as heading to your bank account. The costs associated with starting up a business are huge and for those without the funds to foot the bill out of pocket, you may already be looking to compare business loans. However, there are more options than your traditional loan and here, we’re exploring exactly that.
Bank Loans
While there are alternatives, bank loans still remain one of the most popular forms of finance for both new and existing businesses. Both secured and unsecured loans are relatively straightforward and easy to manage, but getting your hands on an approved application can be where many start-up businesses meet their downfall. Banks are typically wary of handing out cash to new businesses that don’t have a strong business plan or projection, so you’ll need to ensure that you and your business are in a strong enough position in which to prove that you are likely to be able to pay back what’s borrowed. You’ll also find that more banks will require some form of collateral such as property or business assets, as opposed to offering an unsecured alternative.
Peer-To-Peer Loans
Peer to peer loans are a form of loan often given by independent investors that are looking to make strong returns on their spending. For this reason, many of them are willing to invest in start-up companies if they believe in the business plan and what they could gain from their success. This process is typically carried out online and often only requires you to provide ideas for the business and any profit-making potential for the future. Essentially, you’re convincing the investors to invest, but may not need quite as much proof as you would with a bank.
Crowdfunding
Crowdfunding is another form of peer lending, but doesn’t often require any form of repayment. The most common type of crowdfunding for start-ups has been through a website of the same name, through which start-ups can pre-sell products, offer incentives and more to gain the funding they need from potential customers and investors. There are other ways of doing this, but this online platform is typically the mostly commonly turned to.
Seek Angel Investment
Angel investors aren’t too dissimilar to peer-to-peer lending either, but are more typically people with a huge amount of money available to invest. They can also provide investment in groups, so depending on the amount of money you need, you could benefit from a group investment rather than an individual. In some cases, these investors may even offer mentorship and they are typically willing to take bigger risks if they believe it is likely to return higher capital.
Government Programs
Some governments offer capital to start-ups in particular industries, so it may be worth looking into what your local government offers of this nature. You’ll need to submit a detailed plan of your business and how you plan to spend the money that you’re seeking, after which a grant committee will meet to discuss your application. If it is approved, you can be granted much higher amounts than some of the other options in this list, but it can take weeks, if not months for this to happen due to not only the scrutiny of your application, but the volume of applications they may receive.
Securing funding for your business is just one step in the start-up process, but one that requires plenty of thought, time and care, but hopefully this guide has given you a good starting point. So, which option will you choose for your business?