There are many different ways that a business can raise funds. But, today’s businesses are finding it hard to go down the traditional routes. The banks are lending less, and those lines of credit are becoming harder for anyone without the perfect credit score to get hold of.
If you have collateral, it’s a little easier, but let’s be honest: there are a lot of risks involved. That is especially true if you have to secure your loan with your premises, for example. However, there are plenty of other options for you to raise some money that you can use to grow your business. Let’s take a look at three of the best.
Merchant Loans
If you need a quick fix for your business, you don’t have to go down the traditional loan process. There are certain types of small business loans that can be used for merchants. The lender will lend you money against a fixed percentage of your credit or debit card transactions. It could be 5%, 10% or even 20% of your takings, but it does mean that you have the potential to borrow a significant amount. And you will only pay it back from your transactions, without any need for collateral at all.
There are usually tight controls on these loans, however. Typically, you will have to have a minimum amount that you take through the tills each month. Depending on the company you choose, this could be anywhere between $2-$5000 each month. You will also need to have been in business for a minimum of a year, and sometimes longer.
Crowdfunding
If you have a specific idea that you want to achieve for your business, think about how you can capture the public’s imagination. If you can do so, then crowdfunding is an excellent way to raise the money to pay for it. Crowdfunding sites like Kickstarter or Crowdcube help you raise the funds in exchange for small gifts.
It means getting a lot of eyes onto your campaign and lots of little donations from fans of your product. Let’s say you need $10,000 to produce a brand new product. What’s easier to get – 10 people investing $1000 each, or 100 people spending a mere $10? If you can get the word out, it’s an excellent way to drum up cash, and raise awareness of who you are.
Family Partnerships
Asking a family member to invest some cash into your business isn’t as rare as you might think. If they can see the value in your company – and if you can show them – then you could find yourself with a cheap loan, on very friendly terms.
Of course, it is important to ensure that you get on with them and that you can have frank and honest conversations with them about money.
While it can be an ideal route to go down for many entrepreneurs, you have to be aware that it can also cause fractures within your family unit if something should go wrong.
OK, so we hope these tips have given you some inspiration. Now you have some funding in place, head over to our article on great ways to invest your profits!