A principal concern of many small business owners is how to finance the continued growth of their business. While in the past, conventional means like bank loans, and even SBA loans, were popular, today’s economy has business owners reaching for some less-utilized means of finance which, while unconventional, can be as helpful (if not more so) than traditional loan programs. Among others, here are a few popular and reputable ways to finance your business growth.
Find Your Angel
Angel Lenders provide start up or investment capital (usually from their own private funds) in exchange for equity in the business in which they’re investing. Angel investors are often affluent individuals or a group of people who have pooled their resources to provide this service. Angel investing generates a large return due to the risk involved to the investor, but statistically, businesses who employ angel investing are actually more likely to succeed than their traditionally financed counterparts.
Venture Capital typically comes from institutional investors, pools of investors, or individuals with high net worth. Particularly common in technology fields, venture capital investments generally involve lending a business money in exchange for equity in that particular business. Since many businesses who utilize venture capital are too small or too new to qualify for a bank loan, the risk to the investors is high, which translates to a high return on investments and usually a sizable interest in the business.
Equity Trading is a newly-coined term to describe what happens when businesses decide to leave money out of it and trade equity for services. This arrangement can benefit both businesses since the investor doesn’t need money, simply a skill that the other business needs to utilize, and the business needing the investment receives free or reduced work from a company who has a vested interest in their success. An example where this might be a highly valuable arrangement is if you own a great keyword rich domain name, but lack in online marketing skills and need more traffic to grow your business. By finding a complement, where it’s a win-win situation (you make more money and they make money if they produce results) can be a beautiful thing. But if you’re considering using equity trading, be sure to get documentation of your agreement in case you run into any problems down the road.
Though these methods might seem at first to be odd or unconventional, each has proven to be hugely effective and profitable for the vast majority of business owners who use them. Let’s face it, today’s difficult economic climate has made alternative financing strategies a necessary step to financial success. Taking advantage of these lending tools can provide small businesses with a more flexible financial solution as well as the peace of mind that comes from knowing that their business is on sound financial footing.