Seven Alternative Sources of Capital for Setting Up a Business
Borrowing from banks is every small entrepreneur’s nightmare. One gets turned down for bank loans for a variety of reasons, including lack of assets, collateral and business experience. Don’t despair, however. There are several common types of alternative sources of capital for setting up a business available to young companies.
Savings and Investments
The first source you should consider is your own savings and investments. One disadvantage though of self-financing is that if things did not turn out the way you want them to be it will be your money that goes down with the ship.
Angel Investors
Angel investors are affluent individuals who provide capital for a business start-up, usually in exchange for ownership equity. These individuals are looking for a higher rate of return than would be given by more traditional investments (typically 25% or more). Read more
Private vs Professional Investors
photo credit: king_david_uk
Proponents of pooled funds argue that there is a great uncertainty on the stock market, and that it is dangerous for the private investor to play there, as they get prone to high losses and costs. Although there is a grain of truth in this, the argument for holding an investment in a unit trust or investment trust is just as good as that for holding equities. In the long term, returns from holding equities have outstripped returns from safer investments such as corporate bonds, gilts and deposits. In spite of these gains, the fact still remains that professional investors have some advantages over private investors. The advantages enjoyed by professionals span three main areas, namely:
(i) information gap
(ii) economies of scale and
(iii) expertise, and these shall be considered in turn.
Professional investors, fund managers to be specific, have become increasingly powerful as the Read more
Credit Crunch – Not a Credit Freeze
photo credit: the_toe_stubber
First of all, it’s a credit crunch not a credit freeze!
Sure, banks are more cautious about their lending, but when were they not? The reality is that the majority of banks are lending, and to remain profitable they will continue to lend to small business owners. Those that understand the situation are acting now!
“Buy low, sell high”
With the current economic low, it is the best time to get financing at a low rate, with lower-than-ever requirements. Big banks like Citi and HSBC are making their decisions based on business credit scores, not personal fico’s.
Personal guarantee is a promise made by an entrepreneur to personally repay company debts if the business defaults. It is a way for banks to protect themselves, while reflecting the seriousness of the business owner to repay debts. Without a personal guarantee, they are thought to not believe in their business and are high risk. Small business owners don’t want to provide a personal guarantee if possible. Even if they are diligent about repaying debts, some unforeseen catastrophe may happen preventing a loan payment. Then the bank seizes personal assets. Read more
Peer 2 Peer Lending – Cutting Out The Middle Man
In the past getting a loan used to be a pretty intimidating process, getting dressed in your Sunday best, looking your best and venturing into town to the bank for a date with the Bank Manager. Once there you used to have to throw yourself at the mercy of the manager and plead for them to lend you money, getting declined for a loan was often a demoralising and embarrassing process.
These days applying for a loan is much more stress-free with the decision on whether you get given the money being based more on details such as your income, credit report and other factors, but still people can get turned down for reasons other than a poor credit record. In light of the recent credit crunch many banks are being more cautious about whom they lend money to and in some cases have ceased offering unsecured loans. Read more
Find your Own Financial Success- Open a Bar
- An Overview of Personal Loans
- Take Easy Finance With Bad Credit Loans
- Bad Credit Loans: Where Bad Credit Score is An Accepted Reality
- Bad Credit Borrower?s Can Avail Bad Credit Loan UK
- Bad Credit Personal Loan – A Changed Attitude of Lenders Towards Bad Credit
- Set Aside your Credit Woes in Taking Bad Credit Loans
- Bad Credit Loans Rescue you From Difficult Financial Situations
- Bad Credit Loans: Easy Bucks to Battle Bad Credit
- Secured Personal Loans – Single Solution For All Your Financial Ills
- Unsecured Bad Credit Loans: Wipe Out the Bad Credit
- Open a Restaurant
- A Small Business Loan Alternative for your Growing Business
- Cash Advance as a Small Business Loans
- An Alternative to Searching For Business Loans
- Merchant Loan Lenders Provide Cash For Merchants
- Restaurant Finance That is Easy to Acquire
- Restaurant Financing – 4 Options For Every Credit Situation
- An Introduction on Restaurant Investors and Restaurant Lenders
- Know What It Takes To Get Restaurant Financing
- Business Loan Difficulties – Solutions for Bars and Restaurants
- Restaurant Loans – Affordable Funds Delivered Quickly
- Loans for Business
