Alternative Methods To Finance Your Start-Up

Starting a new business can be an extremely exciting and stressful time, often in equal measures and the stressful part can be exacerbated if you are struggling to obtain funding through the traditional methods. But don’t stress out too much, there are various alternatives and as the saying goes, where there’s a will there’s a way! Let’s look at a few of the best alternative funding methods being used by start up businesses today.

Borrow From Family & Friends

Use your own network of friends and family, you would be pleasantly surprised at how many of your own social circle would be more than happy to help out and be part of your new success story. There are a couple of ways you can go about this, firstly you could take a simple loan from someone, and even though it’s someone you know you should get a legal document drawn up detailing the loan and how it is to be repaid, this will give a point of reference for both of you and something legally binding in the event of a fall-out. Otherwise the family member or friend could buy in and invest in the business by taking up a shareholding in the company, this gives them part-ownership and will benefit as the business becomes profitable, the risk though is that they could lose everything in the event of the business failure.

Peer To Peer Lending

Peer to peer lending has become much more popular these days and it’s a method for investors to lend money, and make interest on the loans, and for small business owners to get funds based on more than just a credit search. The lender will read up on the investment opportunities and can decide if it is a wise investment and make the decision as such. It is usually facilitated by a company that takes a % for administering the loan but the lending is from one party to the other.

Release Equity In Your Home

If you own your own home and have built up a reasonable amount of equity in your property then you could consider accessing some of that capital to aid in the start up costs. It would be a good idea to speak to a specialist advisor, such as Key, to give you appropriate advice as to how to do this and if it is a good idea in your situation.

Investment Angels

An Investment Angel is someone who gives you an investment as they believe in your business, they will want some sort of return on that investment and this will be negotiated. The investor will be looking to what they see in you as this is a much more personal form of lending and usually you will be entering into a relationship where you will have someone to seek advice from rather than just borrowing the cash.

Crowdfunding

This is a fairly new funding idea, you create an account on a crowdfunding platform and invite people to donate funds to help you start up. This is a bit different as you are asking for donations so you will have more chance of success if you have an interesting business idea that people are interested to see if it succeeds.

Adam Torkildson