4 Unconventional Funding Options for Start Ups

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It’s not easy getting a business underway in these tricky financial times of ours. Despite all of their promises to ‘back business’, the UK government appear to be failing to get affordable finance to the SMEs who contribute 50% of our GDP. This lack of available funding is hitting start ups particularly hard. Fledgling businesses are a particularly risky proposition for our chastened, cautious banks, despite the affordability of finance thanks to the FLS (Funding for Lending Scheme) launched in 2012.
Yet it isn’t all doom and gloom.  We live in an age of opportunity and technology, which opens a huge number of exciting new doors, despite the big one the banks appear to have slammed shut. Whether it’s sourcing business loans from online lenders like everline.com, finding a business angel on the web or crowdfunding your start up, there are dozens of new funding options out there for businesses of all shapes and sizes. You just need to know where to look. If you’re investigating alternative funding solutions for your start up, here are a few interesting prospects…

Crowdfunding
There are hundreds of crowdfunding sites out there and, if you can capture the zeitgeist and investors’ imaginations, you can give your start up a significant financial boost. There is a considerable amount of diversity in the crowdfunding world. Some sites may allow charitable ‘investments’ (read donations), others are all about giving online investors the chance to see returns from the crowdfunding projects of their choice in the form of equity.

Crowdfunding can be very broad and general or highly specific to different industries. Make sure you do your research before you sign up to ensure you’ve chosen the best website for your enterprise. Here’s a quick, handy guide to give you a more detailed picture.

Business Angels
A little trickier but pair the right prospect with the right investor and you could have a flourishing relationship and business on your hands. Again, there are hundreds of websites and offline networks dedicated to pairing business angels with the perfect prospects, which makes choosing the right platform for your particular enterprise important.

Most angel investments take place at a very early stage in a business’s life – often pre-revenue. This is riskier for the investor but gives angels the opportunity to see huge profits if the enterprise takes off. Because many of these investments result in a loss, angel investors tend to spread their investments thinly across a number of opportunities, investing independently or as a syndicate. You can learn more about finding a business angel here.

Online Social Lending
Also known as peer-to-peer lending this form of finance can be cheaper than a regular business loan – and can be markedly easier to get hold of. Financing takes place via a peer-to-peer lending website. On these websites everyday Joes looking for a better rate than their ISAs allow provide unsecured personal loans to borrowers – again at a better rate. Sounds great, doesn’t it? Well there are downsides. These sites are riskier than a bank business loan and they aren’t covered by the Financial Services Compensation Scheme if they go bust…

Bootstrapping
This is the DIY approach. Less high tech than homemade, bootstrapping involves going it alone. Using up those savings, maxing out those credit cards, remortgaging your property, delving into your overdraft – it’s a do or die approach, but if you’re not confident risking your assets on your start up, why should anyone else be? Now, get out there!

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