Is Traditional Business Financing Dead?

Traditional funding streams for startups are becoming a thing of the past. Going to a bank or an investor and giving them a pitch in the hope that they back your company is still a perfectly viable way to get the money that you need, but there are a lot of problems with it. One of the major hurdles that people face, especially if they’re trying to start a business later in life, is their credit rating.

Everybody makes financial mistakes and they stay with you in the form of a poor credit score which can put off investors that would otherwise be happy to part with their money.

When they’re putting so much of their cash up, they need to be absolutely sure that it’s being handled well. But if you’ve tried and failed to find investors, that doesn’t mean your business aspirations are dead just yet.

There are countless numbers of hugely popular companies that started out using some of these alternative funding streams.

Crowdfunding

You’ve probably already heard of crowdfunding. It’s exploded in popularity in the last few years and it has its fair share of success stories, visit entrepreneur.com to hear about them. If you haven’t heard of it before, the basic concept is that you post a video pitch of your business idea on the site and users can invest money.

The difference is, you set a goal and then people pledge whatever they like, so instead of trying to convince one person to part with thousands of dollars, you have to convince thousands of people to part with one dollar. Some companies have managed to raise millions of dollars in just a few hours.

Line Of Credit

A line of credit for businesses is a great way to secure the cash that you need without having to go through the traditional investor channels. Companies like businesslineof.credit can lend you the cash that you require as and when you need it.

Rather than giving you a lump sum, you just borrow what you need for now. It stops you from over-borrowing and getting yourself into debt for cash that you didn’t need in the first place. It basically works like a credit card but you’ll usually get a far better interest rate on a line of credit.

Peer To Peer Lending

Peer to peer lending is as close as you can get to traditional business financing but it eliminates some of the problems. The sites will set you up with suitable investors that are interested in backing a company like yours.

All sorts of people are on there and they are usually more likely to back somebody on the strength of their business idea rather than basing their decision solely on their financial history. You’ve got a better chance of securing the cash to start your new company.

However, that doesn’t mean you can just hide any problems of the past, you’ll still be vetted thoroughly before anybody parts with their money.

Remortgage Your House

Remortgaging your house is a simple way to raise a good amount of money, but it obviously comes with some risk. If the business goes under, you risk losing everything. If you’ve paid a good chunk of it off you’ll get a sizable sum but it’s a drastic measure that you should only take if you’re sure the business will take off.

Don’t be disheartened if investors won’t give you any money, there’s always another way.

This post has been contributed by Ryan Gatt, it may contain affiliate links.

 

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