5 Ways to Access Money for Your Business
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5 Ways to Access Money for Your Business

Ways to access money for your business.

This article will explore alternative ways of accessing money for a business. It will not cover products of banks such as an official business bank loan, revolving credit, overdrafts and/or credit cards. So, now that it has been established what we will not be looking at, let’s take a brief look at what will be investigated.

The 5 paths to accessing money for your business are as follows: firstly we will explore venture capital, then private equity, thirdly angel investors, peer-to-peer (social) loans and lastly the possibility of government finance.

1. Venture Capital

Venture Capital is money provided by select investors to start-up and small businesses that are calculated or considered to have long-term growth potential. It is a vital source of funding for businesses that cannot access other forms of finance. Generally, this means high risk for the investor but the potential rewards and profit often makes this type of investment worthwhile. When an entrepreneur successfully secures funding from a venture capital company, they may find that the company desires equity as well as a large profit share. This is a great opportunity but be aware of what you are getting into before hand, see that everything is open and transparent and that the venture company is clear of what they expect of you. The more original and profit promising the business model or idea is, the more likely it is for a venture company to invest in it.

2. Private Equity

Private Equity is when investors buy into a business that is not listed on a stock exchange, it is therefore considered to be a private company (non-public). Equity managers invest funds in companies that are considered to have high growth potential. The goal is often to build, grow and improve the business over a number of years and exit the investment at a higher value. The range and possibilities of private equity are huge. It is considered wise to keep your exit strategy in mind at all times as this kind of transaction often involves a lump sum payment at the end of a specified investment period. Do your homework as the possibilities are endless.

3. Angel Investors

An Angel Investor is a private investor who is actively on the look out for a promising and potentially lucrative business opportunity to invest in. Usually these investors are extremely private, often anonymous and can sometimes be contacted through brokerage companies that specialise in these types of investments. Thanks to the great reach of the internet there are increasing numbers of professional websites offering the possibility of connecting you with suitable angel investors. This process cuts out a lot of the red tape that you would have to deal with otherwise. Choose wisely and check references closely - of the brokerage company, the website and the investor. Keep in mind that they will, more likely than not, expect high returns on their investment. Very few invest philanthropically, even though they are referred to as angels, don’t expect favours. Accessing this kind of finance for your business could definitely widen the playing field for you and make your goals a reality.

4. Peer-to-Peer Loans.

Peer-to-peer loans are also referred to as person-to-person loans, P-2-P loans and social lending. With the new economy and the growth of social media, social lending has become very popular and according to experts is expected to trend in the next decade. As banks close doors, peers open them. There are a rapidly growing number of these websites out there, each one offering different terms and conditions. The most widely known one is Kiva.org, they are based in the U.S but offer their loans in developing countries. It is a micro loan, and since it is philanthropic, no interest is charged. It may be worth your while to investigate what is available in your country, for you as lender or borrower.

5. Government Funding

As governments strive to create employment, various financial schemes are being put into place in order to encourage and stimulate economic growth. It would benefit you to find out from your own department of trade and industry what is available for you. You may be pleasantly surprised.

Conclusion

The intention of this article was to introduce you to 5 alternate ways of potentially accessing finance/money for your business, whether it is a start-up or a bit more mature. Look into what is available for you. As the world changes, so do we, and this means that the way money is being accessed and earned is changing too. Keep your mind open and get ready for lift-off!

 

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Comments (4)

That was great. I like peer-peer loan. The peer-to-peer lending model is a fairly recent innovation. Borrowers who qualify for loans through the site announce they need a loan, give the reason and request an amount. Investors then pledge various amounts of capital that can range from less than $50 to a few thousand.

Peer-to-peer lending sites went from relative obscurity to making major waves. Leading online websites like Prosper and LendingClub were growing swiftly, as the crowd sourced method of obtaining loans has become more and more popular. Sites offering peer-to-peer personal loans keep growing, personalmoneystore.com/moneyblog. Though not everyone is eligible to borrow, it is a fairly recent innovation. Loan applicants are subject to a credit check upon applying for a membership, and neither Prosper nor LendingClub will lend to a borrower with a bad credit score.

Thank you for your comment, Althea, it added value to my article. I wrote a whole article/factoid on social lending as I recognise its relevancy in an evolving economy. However, I do not want to promote any company as this article is not meant to sell, rather share. Again, thank you ~

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