Traditional bank loans are one of the most obvious methods of financing the endeavor. The businessman must consider this fact that given
- More than 82% of the small business loan applications are thus denied by big banks.
- This is due to the saturation of the SMBs and the high risks involved in small ventures.
- Big banks, however, have a set of strict requirements that make it challenging for small businesses to qualify for traditional bank loans.
- The small businesses are thus financed through
- A variety of methods
- Including the owner’s own personal savings
- The loans from
- The family members
- Friends, and
- Small business owners may need to explore other methods of financing.
- However, it is difficult to get a business loan after bankruptcy.
Alternatives to business loan
Purchase only what is necessary
- If getting a loan is not an option, then the borrower should be ready to spend minimally when they are starting.
- Since 50 percent of the businesses fail within the first five years, according to the SBA. It thus makes financial sense to start with the bare necessities and build your business slowly as it starts gaining momentum.
Raise money through crowdfunding
- Crowdfunding is a great way to help new companies to raise money to fund a project or a business venture.
- Many popular sites allow entrepreneurs to raise capital to increase the business for a smooth run.
- The money received from crowdfunding comes in the form of donations or investments. If you have the right message in place, then it can be a great way to fund your business.
Seek help from family or friends
- Borrowing money from the family or friends can prove to be useful for the businessman to get his business started. The more detailed your business plan is the greater chance you’ll have of getting them to lend you the money.
- The businessman can show the estimated yearly projections and then provide the lender an exact time frame on when can you pay them back.
Get a business partner or investor
- An actual business partner may be ideal if the borrower is looking to eventually grow and then want to bring new and fresh ideas to the table.
- A business partner can help with more than just the finances
- They can help to advertise
- Help with creating the product, or
- Either providing the service
- Handle the accounts. etc which is however ideal for those who wish to remain a sole proprietor.
Acquiring funding is thus one of the toughest parts of starting up a business, and then definitely the most stressful also. However, there is a vast abundance of entrepreneurs that are struggling with the same problem. Luckily, there are plenty of different ways to get the business-funded which acts as an alternative to a business loan.