Author of this Article is Eshita Goel
The most important QUESTION MARK for startups.
New businesses are one of the most challenging groups to finance.
Angel Investors and Venture capitalists are mostly interested in companies that can grab market quickly and generate a big payoff with an IPO (Initial Public Offering), purchase, or other similar exit. Investors are looking for startups that will be very successful. Even the banks around the corner may have rejected your loan application.
You must be tired of listening some of the common answers from the investors for investing in your startup. Here is the list of the possible excuses:
- We don’t see this as a fit at this time
- We are hesitant to invest as the lead, but keep us informed if you get a lead term sheet.
- I’m unsure on this one. Let me set you up with one of our associates who has more
expertise in this area.
- We see this being competitive to one of our portfolio companies.
- We would be more interested if you would have included in your product.
- We are unsure of your business model and will need to see more proof points before we feel comfortable.
- Your market isn’t big enough.
- We don’t like the capital structure of the company.
- We tend to invest locally, and you are located too far away.
There are sure to be bumps in the road when pursuing the dream of starting your own business. Often times, when business owners apply for funding through a traditional bank they are outright rejected or offered too small of a loan amount.
If this is has happened to you, you’re probably asking,
“What do I do now that a everyone has rejected my loan application
to fund my business?”
Well let me tell you ‘where there is will, there is a way’.
Do you know SKYPE – (An application that provides video chat and voice call services. Users may exchange such digital documents as images, text, video and any others) was rejected 40 times before getting funded and giving on to a massive exit.
So, When traditional business funding options are not meeting your needs, don’t worry. Alternative business finance can be your business’s saving grace. Let us have a look at them.
Family & Friends
Personal Credit Cards
BUSINESS FINANCE METHODS
Business Credit Cards
- CROWD FUNDING
The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet is called Crowd Funding. It
is a relatively new way startups access capital.
The crowd funding model is based on three types of actors:
- a. The project initiator who proposes the idea and/or project to be funded
- b. Individuals or groups who support the idea, and
- c. A moderating organization that brings the parties together to launch the idea.
Depending on the type of business you’re starting, how far along you are in developing your product, and your ability to “sell” your idea on one of the many crowd funding platforms, it could be a good way for you to fund your small business.
- FRIENDS AND FAMILY
Although friends and family isn’t the most popular place to look for funding, it’s still
a viable option and where the vast majority of small business owners find capital. In
fact the success rate is better than grants, crowd funding, credit cards, and other types of online and offline small business lending.
- PERSONAL CREDIT CARDS
A lot of business owners leverage their personal credit cards to access capital for their business. But using a personal credit card over a business credit card is not a better
option. Because credit card companies report to the credit bureaus at the time they invoice you, even if you pay them off immediately. Most credit card companies
report on your personal credit report—potentially lowering your personal credit score.
- BUSINESS CREDIT CARDS
Before you use a business credit card for business, it’s important to make sure you
report to the business credit bureaus. This will allow you to better manage your personal credit score in addition to you business credit score. It might even help you improve your personal score.
Most common way to fund your startups is bootstrapping. It means starting a business
without external help or capital. Such startups fund the development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture, a small amount of money will be set aside for the bootstrap process.
- VENDOR FINANCING
Vendor finance is a form of lending in which a company lends money to be used by
the borrower to buy the vendor’s products or property. Vendor finance is usually in the form of deferred loans from, or shares subscribed by, the vendor. The vendor often takes shares in the borrowing company. . Although a vendor probably won’t offer capital to help you start your business, they may offer special terms to give you a little way.
- ONLINE LENDERS
There are also a lot of options available online for small business owners with at least
a year in business. Online lenders don’t hold you to the same rigid credit criteria as traditional bank might, but you’ll need to have some business history to find success with this type of financing.