Financing a new business is no easy task unless of course you are lucky enough to have a trust fund or winning lottery ticket to cash in. For the rest of us, start up financing can be especially trying as most traditional banks and trusts won’t lend to companies without an established credit history, which usually means a business that’s been growing for at least five years. Even today’s prosperous businesses are having a hard time with small business finance as business loans are getting harder and harder to come by.
Challenges and Choices Abound for Start Up Business Funding
Many of these small to medium sized businesses have found much success with factoring receivables, which places far less stress on credit checks and far more focus on the good standing and history of your clients. Though invoice factoring companies will often take the time to try to work with and provide start up funding, a lack of steady customers with sizable invoices can make the task more difficult. Moreover, factoring accounts receivables tends not to be the best choice for certain types of businesses, including retail, restaurant, bar and many service-oriented businesses – which look to credit card factoring & financing as a primary solution..
Looking Past Factoring Services, Crowdsourcing Is a New Trend
So where can others go for smart business start up funding? With a new trend on an old practice, a handful of young startups today are harnessing the powers of social media and moving into crowd funding. A twist on the practice of asking friends and family for a business loan, crowd funding or peer-to-peer lending is a practice that allows unknown investors to provide money for a startup and then receive a small stake in the business as a return.
The model is that many give a little rather than a few give a lot. This way, the risk is split and therefore reduced by all who participate. It is more commonly used by youthful techy, artsy or creative ventures to secure cash from an older generation of investors. Kickstarter is one popular crowdsourcing site and GoFundMe is another. Though there are some who voice concern over the lack of regulations by these type of new financing options, others are excited to see how this new business funding method will work itself out in the years to come.