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How To Fund Your Small Business

The 2008 recession might have been a few years ago, but the British population are still coping with the initial shockwave as well as dealing with the financial aftershocks. The economic downturn has made many businesses go bankrupt, and if you’re a small company looking to expand, it’s proving to be extremely tough to get a loan or financing.

Seeing as the banks started the problem in the first place, you’d expect a little help somewhere along the line in order to get your finances on track. However with the list of ‘high risk’ businesses on the rise, banks are closing up shop and refusing to lend to new starters who can’t produce a big enough return. If you’re a small business or you’re looking to start one up, here are a few tips on how to raise some much needed cash to get things going.

First things first…

Check out Social & Peer-to-Peer Lending

This type of borrowing has become increasingly popular over the last few years, with young entrepreneurs choosing to find finance online instead of camping outside the banks. Simply put, social lending puts your needs in touch with people online that are willing to help you out. A broker will determine the amount of money you need, and then put you in contact with people online that are willing to lend the same amount. Basically, you decide the type of the loan, the length and how much interest you want to pay, and then the broker matches your credentials with lenders. This way of lending has many benefits, most notably not involving any banks or institutions. Both borrower and lender get better rates than if they were to go through a bank too. Just sit back and let the site compile all the necessary paperwork and transactions!

Crowd-Sourced Funding

Similar to social lending, crowd-sourced funding also involves a network of people lending money. However instead of a set amount, the individuals involved in crowd-sourced funding lend as much or as little as they want, backing a project instead of loaning cash that could be for a number of things. For example, crowd-sources funders may lend money to a project they believe in, whether it’s a film, an album, or a product. In return for the cash loan, the investee will offer rewards related to the project, maybe a credit in the film, or a song title on an album. They may even name their product after an investor. The size of the loan will depend on the size of the project, and terms/rewards will have to be ironed out and put on paper before any cash is exchanged.

Angel investors

Relatively new in the lending business, put simply, these investors will front large amounts of money in exchange for equity in your business when the banks aren’t interested. If they believe in your business, they’ll back it, however they will need to see detailed and convincing business plans which show a return on their investment – if your pitch isn’t right, you’ll lose the cash!

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July 17, 2012 um 5:02 pm
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