Startups and small businesses can choose different options and routes for financing. Numerous feasible choices are available in the market that will help in raising capital for a business; every startup needs access to these. However, not all of them will have the means to self-fund their business. That is why online lenders have become a popular alternative to traditional business loans.
When looking for options, you need to consider hiring a financial advisor to avoid getting the wrong one.
Here are some non-bank financing methods that startups should consider:
Angel Investors. These are affluent individuals who provide capital for startups in exchange for ownership equity or convertible debt. They usually ask for a 20 to 25 per cent return for their investment. They have already helped many well-known companies like Costco and Google.
Venture Capitalists. Venture capital is money that is given to help in building startups that are considered to have both high risk and high growth potential. Fast-growth companies with an exit strategy in place will earn more; this strategy can be used in investing, networking and expanding a business. Venture capitalists can generally advise business owners on whether their business will be successful or what they need to do to improve their market.
Invoice/factoring advances. Under advance factoring, money is paid by the factor in advance to a business. Invoices that have been billed out are paid in advance by a service provider, which you then pay back once the customer has settled the bill. In this way, a business can continue their operations while waiting for the outstanding invoices to be paid. This strategy will also allow businesses to close the pay gap between payments and billed work to contractors and suppliers.
Crowdfunding. This is the practice of funding a venture or project by raising money from a more significant number of people. It is a form of crowdsourcing and alternative finance that is done on the internet. Websites like Indiegogo and Kickstarter provide crowdfunding, which can give a boost to financing small businesses. These sites allow businesses to pool small investments instead of looking for a single investment source.
These are some of the effective non-bank methods startups can use. These financing processes have the advantage of speed as a typical application will only take about an hour to complete, and the approval can be issued within days.
If you are looking for a financial advisor regarding this, New Wave Advice can provide quality financial advice for you. Contact us now!