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When it comes to funding a new startup, many SMEs find it increasingly difficult to get the required funding to get up and running. If you are coming across hurdles and blocks via traditional business funding options, it doesn’t automatically mean you need to abandon your dreams. Instead, it would help if you looked at alternative funding options that can support your new venture. The key is to find the right choice for you to be able to move forward.
But what options are available for new enterprises?
Finding an investor for your startup in emerging markets, especially in the fintech industry, can be a valuable option. Private fund investments can be a great way to raise the capital you need when you need to move fast and plug a hole in the market quickly before someone else does! A company such as Sturgeon Capital can allow you to tap into the funding you need and create a mutually beneficial relationship for both parties.
For startups and early-stage enterprises, one of the most common kinds of alternative financing is provided by a group of investors known as a “business angels” group. These are typically very successful, self-made entrepreneurs looking to acquire shares in potentially lucrative early-stage companies with their own money. All the details can be worked out between both parties as the investor puts up their own funds.
The use of private equity investors is more typical among established organisations. They can assist enterprises in accelerating their growth by expanding into new markets or purchasing competitors to solidify their position within a sector. A conventional private equity transaction may result in the total buyout of the company’s senior management; however, some owner-managers may decide to retain control while realising only a small portion of their stock value in the transaction.
Some entrepreneurs and startups opt to apply for short-term credit cards, which allow them to borrow money interest-free for up to 56 days as long as the card balance is paid in full each month. This can be useful if you are looking for small initial amounts to get up and running and confident you can turn a profit quickly.
Equity crowdfunding platforms allow startups and fledgling enterprises to pitch potential investors, saying they need money to grow their business and offering a proportion of their shares in return. Interested parties can then decide whether or not to make a promise.
In the UK, Crowdcube and Seedrs are the leading players, but several specialised platforms seek to carve out their niche. Some larger companies have chosen not to use a platform and instead market directly to potential investors.
Peer to Peer Lending
Established enterprises with reliable earnings and credit history can use peer-to-peer lending platforms to indicate their funding needs – how much and for what. The software then performs due diligence on the company and assigns it a risk score. In a reverse auction, investors bid how much they wish to lend and at what rate. The interest rates are higher than the banking market, but loan applications can be processed quickly and with a flexible loan period.