Do you need funding for your first business, but you don’t want to engage with a traditional bank?
The market provides access to countless financing solutions for young entrepreneurs. When starting a company, your success’s key components are your innovative ideas and willingness to put in the work to see them come to life. In the present environment that encourages meritocracy, there should be nothing to stop you from becoming your own boss and achieving your goals. Sadly, as many other young entrepreneurs, you have a fantastic business idea but no funds to support it. You need to raise capital to power your company, but you don’t want to get a traditional bank loan because they come with daunting conditions. Nonetheless, as stated before, there are other ways to obtain funding for your first venture. Are you ready to discover them?
Community Development Finance Institutions
Many non-profit community development finance organizations worldwide offer capital to small business owners who need help to get their companies off the ground. The advantage when working with a community development finance institution is that you get a loan on reasonable terms.
These organizations are created to support ambitious start-ups based on innovative ideas that have the power to stand out on the market if their initiators would have the money to power them. They handle application loans from all industries and provide help to viable ventures with the best shots to thrive and grow.
These lenders differ from traditional banks because they offer loans even to individuals with poor credit. They check credit scores, but analyze them differently from banks because they want to know they work with fiscally responsible entrepreneurs.
Partner Financing
When you get strategic partner financing, another player joins you at the business table. An entrepreneur or organization with available funds can invest in your business in exchange for special access to your business or products. Some partners ask for a percentage from the income, while others want to be part of all operations and decisions. When you work with a partner, you share your business idea, benefits, and difficulties.
Strategic funding works similar to venture capital in that you have an equity sale where your partner gets a percentage of every product or service you sell. When you don’t want to get a loan, this solution is a good alternative because it allows you to enter the industry with no debts. They assume the risk the moment they offer to become partners.
You can get in touch with a company that targets the same audience and ask them to become your strategic partners. Assuming your products are compatible with their services, they would be able to get an incentive from investing in your venture.
Angel Financing
Angel investors are wealthy individuals who invest in start-ups in exchange for an equity ownership interest. This financing solution has gained popularity lately since it has powered many high-profile brands like Facebook, WhatsApp, and Uber. Angel investors took a shot with these innovative ideas, and they multiplied their income. The sole purpose of angel investing is to provide funds for a business that is likely to outsize the return. An angel investor can offer you from $25,000 to $1.000.000, but if someone thinks your idea is worth more, they may even invest more.
Before providing you with the funds, an angel investor may evaluate your business idea to determine if it’s likely to succeed on the market. They care for:
– A clearly developed business plan with clear evidence that the market needs the product you provide
– Your integrity, commitment, passion, and quality of thought
– Your venture’s potential to meet a market opportunity or need
– Interesting intellectual property or technology that can shift the trends
– Reasonable terms
How can you find an angel investor?
The best way to find an angel investor is to connect with them through your network or have a solid introduction from a friend or colleague of the angel. You can use LinkedIn to determine the connections you have and determine if you have common friends. Angel investors usually invest in an industry they know well because it allows them to evaluate the success chances a business has.
You can also find angel investors if you join an angel investor network, ask your accountant or lawyer for recommendations, get in touch with entrepreneurs, investment bankers and venture capitalists.
Online loan
Online loans are available from many alternative lenders. If you get one, it can help your venture grow, fund research to develop a new product, expand your business to a new territory, boost sales and marketing efforts, or hire new staff. Before you apply for online loans, ensure you make a list of the most reliable lenders and understand their conditions.
You can choose from many online loans, and the options vary depending on your credit score and financial needs. There are more online lenders than ever because people prefer to apply for funds from their house’s comfort than visiting a traditional bank. A simple online search can deliver a list of the most popular and reliable online lenders that offer personal and business loans.
To determine if it makes sense to get a loan from a financial entity, you need to analyze the terms they propose and compare them with those from other alternative lenders. Review the interest rate on the loan you want to get, and check how it varies over different periods. Some loans vary over time. Also, check how often you need to pay the interest because some lenders ask for quarterly interest while others tax it monthly.
Many lenders have loan origination fees you need to pay even if you don’t get the funds. Find out what fees and costs (administration fee, loan processing tax, underwriting fee) they impose for different loans.
And last but not least, ask if the lender requires for collateral or security.
Final thoughts
Finding funding for a venture is challenging, especially if you’ve never done it before. But you have access to the internet, which is a tool that connects you with people interested in investing in innovative ideas, and therefore there is hope.
