Creating a business and getting to grips with all the variable involved is a challenging experience. It is one that definitely requires a lot of hard work, dedication, and finance. Most startups need funding and that is where banks, investors and alternative lenders come in. If you need funding for a small business, you’ve a few options and this article will take a look at them.
- Bootstrapping
Basically, this term is used to describe a company that is trying to build itself using money from the owner or money that is generated by the business. It is also known as personal investment as you are the only one trying to build the company using your own money. You’ll find that most private investors and lenders are more willing to give money to companies who follow this model as it shows the owner is isn’t relying solely on external funding.
- Alternative Lenders
This is becoming more and more popular amongst startups and other small to medium enterprises as alternative lenders are more willing to give money than traditional banks and credit unions. They operate outside of traditional banking channels and most of them focus on people with bad credit history and short-term loans. They offer a huge amount of flexibility and funding solutions can be customised to suit the borrower’s needs. If you want to learn more about alternative lenders and the service they provide, Universal Finance is a good place to start.
- Investment from Family & Friends
Borrowing money from your family or friends is always going to be difficult, so you must be cautions when taking this approach. Money can easily get between people and it can wreck relationships. If you ask friends or family, make sure they know the risks involved.
- Traditional Banks
Although you’ll generally get a lower interest on loans with traditional lenders, it can be incredibly difficult to get approved, especially if you don’t meet all their lending criteria. They tend to have much stricter requirements than alternative sources of finance. Some reports suggest that over 80% of businesses applying for loans are rejected.
There are just four ways to secure funds for your startup, each of them have their own pros and cons. You can also apply for grants, depending on where you are situated or look for money from private investors who are willing to back your business. A lot of startups are using alternative lenders as they offer convenient services and quick turnaround times.
