Starting and running a business is no easy task. Aside from having to manage the day-to-day operations of the company, business owners also have to find ways to finance their businesses. This can be a daunting task, as most banks are reluctant to lend money to small businesses.
Over 60% of small businesses don’t get the funding they need from traditional lenders like banks. Many factors come into play starting with the size of the company, the owner’s credit score, and the industry the business is in.
However, this doesn’t mean that it’s impossible to get funding for your business. There are many alternative lenders and sources of financing available, you just need to know where to look. Here are the top 3 tips on how to obtain business funding.
Look into the Alternatives
There are a variety of lenders and financing options available, so it’s important to do your research and find the one that best suits your needs. If you have a good credit score, you may be able to qualify for a loan from a traditional bank.
However, if your credit score is less than perfect, you may want to consider alternative lenders such as online lenders, peer-to-peer (P2P) lenders, and microlenders. Each type of lender has its eligibility requirements, so it’s important to find the one that’s right for you.
A great example is debt funding for SMEs (Small and Medium Enterprises) that have been dominantly shifting the business market. In the UK alone, SMEs are becoming the driving force in the economy, where over half of the employment opportunities are coming from them.
More and more small business startups are being founded each day, and this has led to an increase in the demand for debt funding, creating the perfect market for alternative lenders. Many of them are willing to work with businesses that have less-than-perfect credit scores, making them a great option for financing your business.
Debt funding can be helpful no matter what industry your business is in because it provides you with a flexible way of getting quick cash without having any collateral, something that traditional loans require. The great thing about debt funding is that there’s no pre-set limit on how much money you’re able to borrow which means that even if you need a large amount of money, you can still get it.
Crowdfunding is a great way to raise money for your business without having to go through a traditional lender. With crowdfunding, you can post your business project or idea on an online platform and solicit donations from the general public.
There are many different crowdfunding platforms available, so it’s important to do your research and find the one that best suits your needs. One of the most popular platforms is Kickstarter, which focuses on creative projects. If you have a product or service that you think people would be interested in, crowdfunding could be a great option for you.
Crowdfunding campaigns typically have three main components: rewards (what contributors get), funding goals (how much money needs to be raised), and incentives (what contributors will get if the campaign meets its funding goal). It’s important to have a well-thought-out plan for your campaign, as this will increase the chances of success.
Crowdfunding is a great way to raise money for your business, but there are some disadvantages to consider before you launch a campaign. First of all, it can be time-consuming to manage a crowdfunding campaign. You’ll need to promote your campaign and interact with potential contributors regularly. Additionally, there’s no guarantee that you’ll reach your funding goal, so it’s important to have a backup plan in place in case your campaign is unsuccessful.
Find an angel investor
An angel investor is an individual who provides capital for a business in exchange for equity. Angel investors are typically wealthy individuals who are looking to invest in promising businesses. If you think your business has what it takes to attract an angel investor, there are a few things you need to do first.
First of all, you need to put together a great business plan. This should include information about your business model, target market, and financial projections. You’ll also need to have a solid track record of success. If you’ve already launched your business and it’s doing well, that will give you a great chance of attracting an angel investor.
Another thing to keep in mind is that angel investors are typically interested in businesses that have high growth potential. If your business is in a niche market or has a slow growth rate, it’s unlikely that an angel investor will be interested. Lastly, you need to be prepared to give up a significant amount of equity in your business. Angel investors typically want at least a 20% stake in the businesses they invest in.
Angel investing can be a great way to get funding for your business, but it’s important to keep in mind that it’s a high-risk investment. There’s no guarantee that you’ll be able to find an angel investor, and even if you do, there’s no guarantee that they’ll invest in your business.
If you are a small business owner and don’t have access to traditional bank loans, then debt funding could be the solution you need. Crowdfunding is also an option if your company has already launched successfully but needs more capital to grow at a faster rate.
Finally, it may make sense for some entrepreneurs who want to raise money from angel investors by giving up equity instead of cash because they can help with specific tasks that will drive growth for their business in exchange for ownership. Which type of financing do you think would work best for your business?