Monday, 13 June 2016
Pros and Cons of Unconventional Startup Funding
As any entrepreneur who has gone through starting and funding his business will tell you it can be very challenging to obtain money for the start-up. Traditional banks are very risk averse and will not provide you money if they sense risk in your business,
which is what all start-ups inherently have. Fortunately, number of other alternative sources of funding have opened up that can help entrepreneurs get funding without having to go through the hassle of traditional funding route. Not all unconventional sources of funding are equal, however and you need to do proper research before
jumping on this bandwagon.Here are some of the pros and cons of unconventional start-up funding that you may want to consider if you are not going the traditional route with the funding of your UK business.
An important note though – it is important that you have a trustworthy bank account set up that will cover your basic banking needs and help you keep your finances together.
Pros
If you choose to start your business without the aid of a traditional bank, then you will free yourself of much of the red tape that comes with it. Many banks will be very precise about what they want done with the money they are lending you. You will also not have the pressure of paying back a loan within a specified period of time.
Traditional banks will not lend to certain types of small business. If you are in an industry that is known as high risk in the banking industry, you will have a much easier time if you go the unconventional route.
Unconventional start-up funding may actually have no interest component at all if you use grants or crowdfunding.
Cons
If you choose to fund your start-up with an unconventional start, you may find that things can get more challenging. First of all, unconventional money can be more difficult to obtain. Grants take a great deal of research and crowdfunding takes a social media presence that you may not have.
Unconventional funding may also bring with it more responsibility that is actually more difficult to overcome than the constant interest payments. If you misplace the trust of the people who have funded you once, there is no reason that they have to fund you again. Because there are no rules to the game of unconventional funding, you can be thrown out of the game for any reason.
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