In case you need more cash to expand your small business, there is a number of methods you can source the funds. Take a look at each of these options, and use the pros and cons to determine which one is the best option for your small business.
- Online Lenders
Becoming increasingly more popular, online lenders have changed the whole small business lending process. These lenders provide small business owners an attractive alternative to business funding from traditional sources, offering terms, promptness, and simplicity that suits small business requirements. There are so many online lenders offering different types of flexible funding products customized for small-to-medium businesses.
Pros of Online Lenders
- Quick funding process
- Easy online application
- High approval rate
- Unsecured business loans
Cons of Online Lenders
Varying interest rates is the only downside of getting small business funding from alternative lenders.
- Angel Investors
Angel investors usually enter at start-up phase but also can provide capital to small businesses. Angel investors are prosperous people who generally use their personal funds to invest in your business growth in exchange for ownership equity or convertible debt.
Pros of Angel Investors
Angel investors provide attractive amount of working capital, which is normally up to $500K, flexible business agreements.
Cons of Angel Investors
Funding from angel investors can be expensive, take a proportion of the business, often active involvement in business.
Crowdfunding is one of the most trending platform for business funding, including small business capital. Business crowdfunding includes getting funding for your business through the collective effort of a large group of people along with your family, friends, acquaintances, individual investors, as well as customers. Then you definitely depend on their networks to share your crowdfunding campaign and spread the word. There are a few crowdfunding options – rewards-based, donation-based, peer-to-peer lending, as well as equity-based.
Pros of Crowdfunding
Large investors reach you through crowdfunding platforms efficiently.
Cons of Crowdfunding
Not for large amounts, it is generally for less than $100,000, delays in reaching the target and getting the funding for business. Plus it carries intellectual property risk.
Traditionally small business owners might visit their local bank to apply for a business loan.
Pros of Funding From Bank
Banks are relatively more established institution than any other lending platform.
Cons of Funding From Bank
Funding from bank is relatively slow process. It also have low approval rate for small businesses.
- Venture Capitalists
Venture capitalists are investors who offer funding to startups or small businesses that might be look to expand. Unlike angel investors, venture capitalists are generally a corporation rather than a private investor.
Pros of Getting Funding from Venture Capitalists
Venture capitalists give you access to larger amounts of capital and the investment repaid with business profits.
Cons of Getting Funding from Venture Capitalists
The downsides of venture capital funding is loss of control, strict and inflexible agreements. The decision-making process could take longer time as compared to other type of funding. Profit share and loss of equity.
Consider each of these small business funding options, and choose based on which small business funding option will help you retain the most control over your business while offering flexibility, speed and ease.