It is not new that a lot of new small business fails within a five year period. If we talk about new ventures, is correct to say that an average 20% make it. This is due to many different reasons; however the main contributor to new small businesses failing is the lack of capital. Raising capital is among the most daunting challenges entrepreneurs face.
It is easy to picture local banks as the go-to funding source for entrepreneurs. But banks don’t invest, they lend only if you have sufficient collateral. The SBA? They don’t lend directly, they just guarantee some of those collateral-backed bank loans. Venture Capitalists? Angel Investors? Of the 5 million new businesses started each year, VCs fund a shockingly low 400 to 600. Angel investors fund more, but still only about 16,000 enterprises.
This article will help with ideas and resources for you raise capital or finance your business in a new way. The idea is to show you easy and alternative business funds for you borrow from $500 to $100,000 within minutes. Crowdfunding, Peer-to-Peer Funding and Short-Term Loans are the new alternatives that thanks to the new technology promise to stay for a while.
Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. Peer-to-Peer Funding websites work very similar to how banks lend money. Investors pool the funds together meet the required amount of funds needed by the borrower. Each investor can place a small cash deposit of say, $25 on up to tens of thousands. Short-Term Loans or Private Funding, just as it sounds, is money pooled together and dispersed by a brokerage to existing businesses. Bellow find 9 alternate sources of capital for entrepreneurs and separate by practices or platform.
KickStarter – Reward-based online platform that lets you exchange perks for cash. If you fall to meet your goal, no funds are awarded. For successful projects, a 5% fee will be applied plus a 3%-5% credit card processing fee on pledges – www.kickstarter.com (Check also www.indiegogo.com)
Angel List – His equity-based crowdfunding site caters to angel investors seeking deals and entrepreneurs seeking capital. It posts online company profiles to help startups attract investments from accredited angel investors. The carry charge, decided by the lead investor, ranges from 0% to 20% – https://angel.co
EquityNet – An equity-based crowdfunding platform on which startups post their company profiles and present a fundraising campaign to more than 20,000 investors who choose which companies to invest in. Basic features are free but entrepreneurs pay a subscription starting at $109 a month for access the investor network – www.equitynet.com
Funding Circle – This program offers loan amounts from $25,000 to $500,000 over two to five years from investors and institutions. Credit scores, cash flow, and customer reviews are factors for approval from a loan specialist. Origination fee is 2.99% with interest rates starting at 9% – www.fundingcircle.com/us
Lending Page – Approval takes less than five minutes. Borrowers can get up to $100,000, with interest rates that start at 5.9%, and a one- to five-year payment term. Investors select the loans they want to invest in and receive monthly payments from borrowers – www.lendingclub.com
Prosper – Looks at your personal credit score. Once approved, you post your loan listing online with details about your loan amount and purpose. Investors will choose the loans they want to invest in. Origination fee varies and interest rates is around 7% APR – www.prosper.com
Kabbage – Approval usually take seven minutes. It looks at factors outside of your credit score including seller rate, year of business, transaction volume and revenue. Fees are 1% to 16% of the loan amount the first two months and 1% for each of the remaining four months (The loan need to be paid off in six months) – www.kabbage.com
OnDeck Capital – Provides funding in as fast as one business day, but you must have at least $100,000 in annual revenues and have been in business for at least one year. You can borrow anywhere from $5,000 to $250,000 with a 2.5% origination fee. Interest rate averages around 15% of the total loan – www.ondeck.com
PayPal Working Capital – If you have a Pay Pal account, you can borrow up to 8% of your annual PayPal sales. The site approves funding within minutes. Looks at your PayPal history rather than your personal or business credit score, and allows you to pay one fixed fee without late or early repayment fees – www.paypal.com/webapps/workingcapital