Few people have enough cash on hand to start a business. Instead, they seek investors that will give them money to start their company. Many new business owners also use loans to purchase inventory, computer systems, furniture, and other necessary items. They might also turn to various forms of credit to meet their payroll obligations, especially during the first few years of business.
In today’s world, though, there are non-traditional investment options that could lower your need for loans and credit.
Crowdfunding: Small Pledges From Multiple Sources
Crowdfunding makes it possible for individuals to start businesses without securing large investments from single sources. Instead of trying to find a single investor that will pour thousands of dollars into a startup, entrepreneurs seek small donations from hundreds or even thousands of investors. Investors might contribute as little as $1 each to the business. Websites such as Kickstarter.com have made this a popular funding option for small businesses and individuals that need financial support to complete a project.
In many cases, crowdfunding does not treat contributors like investors. Those who contribute money might not expect to see a return on their investment. Instead, it is more likely that they will receive goods and services from the business.
Small businesses might need small, short-term loans to meet their financial needs. Instead of borrowing from a bank, though, they might seek microloans from non-traditional investment sources. The Small Business Association gives money to numerous organizations that redistribute funds as microloans to businesses that need to purchase inventory, supplies, furniture, machinery, and other necessary items. These loans can reach as high as $50,000, but the average loan is closer to $13,000.
There are also several websites and organizations that help small businesses connect with individual lenders around the world. Kiva, for instance, allows individuals to lend as little as $25 to borrowers. Each lender gets to decide which borrower their money goes to. That makes it possible for them to fund business ideas that appeal to them. In many cases, the microloans are used to support small startups in underdeveloped countries. Small businesses in the United States, Europe and other developed areas, however, can also seek assistance from microlenders.
If you are starting your first business, then crowdfunding and microloan programs are non-traditional investment options that could offer the benefits you need. Explore your options and keep an open mind to locate non-traditional options that will help your business succeed.