Let’s face it, getting money to finance your business is no easy task, and especially so when you’re talking about recessions where people’s pockets are harder and harder to get into, but say you’ve got a good idea for a business that in any other economy would work, but it just cant provide the 30x ROI that Business Angels (BAs) are looking for now. Nor do you have the capital yourself that you need to develop a prototype, or start selling, so what on earth can you do?
Small Business Loans
Small business loans are a great way to get yourself a prototype or a launch product, but the truth is in this climate banks are just about as stingy with their money as BA’s and most other investors. So the short story is, getting a loan may not be easy, but all the while bring in a biz plan, talk to your local banker, and see if you can’t squeeze any money out of them.
This is one option, but by no means should you stick to this one, and anyways, it’s old, outdated, adds additional risk to the entrepreneur and you may have to put down collateral, which quite frankly is not ideal.
Peer 2 Peer Lending Options
A great option to getting cash is P2P Lending – basically there are websites out there, usually two or three per country, that put lenders and borrowers in touch with one another. The website tends to manage risk, provide the lenders with the borrowers debt rating etc… one such site in the UK, and Italy is Zopa, Spain has Comuniate, and doing a Google search ought to point you in the right direction for the service in your country. Rates are typically fixed, and it’s much easier to get
This is by far the favorite, but also requires a bit more leg work than the others, and if time is on your side, we highly recommend trying to get Crowdfunded. What is it though, basically it’s getting the community at large to help fund your project, it’s worked well in the music industry, people have made movies based on crowd funding, as well as started all sorts of projects, businesses, etc… To see a few examples of what it does we recommend heading over to Kickstarter, and as for a quick portal where you can start your own fund we recommend Create A Fund.
When it comes down to funding a project though, we highly recommend offering something in return. After all people are giving up their own hard earned cash to help you reach for the sky, so give them something back, be it a page on your website, a personalized letter, inclusion in materials, adding them in the credits of a film, whatever you feel like.
Another good thing about crowd-funding is that it typically happens via PayPal, meaning if your entire project costs €2000, but the payment needs to be done in stages you can raise your first 500, start the project, etc… and develop it as the money comes in.
Did we miss anything? Let us know.
I’m so glad the author went with methods other than “family funding”. With the right family dynamic, it works well.
However, being a 3 time entrepreneur, I have seen “family funding” turn into “ex-family debt”. Once the money has changed hands, the debtor and debtee never have quite the same relationship. Whether expressed or not, everyone feels like someone owes favors.
My parents really wanted to help me out, but as much as I have needed the capital I have never taken a dime. We have never had any problems because of it!