Where you get funding and how you go about acquiring it can mean the difference between successfully expanding your business or dooming yourself with excruciatingly long processing, missed opportunities and delayed growth.
All money can sound good as long as you get it. The fact is – it isn’t. Sometimes it makes sense to tap a few different sources of capital other than banks. You can compare unsecured business loans here, for instance, and see how it differs from traditional business loan providers.
There are myriad financing sources available for Australian entrepreneurs. Here are some of the options.
Friends or family members with deep pockets. Fast and easy, little to no paperwork, and inexpensive. These loans come from the people who you know best, they know how hard you’re working for your business and they also know what they’re investing in. Keep everything professional by making clear agreements and laying out all conditions officially.
Government support. Business grants from the government can be very hard to obtain, but there are numbers of this loan type available to Australian SMEs and entrepreneurs. The territories and states support small business with unique programs. The Victorian Government Technology Innovation Fund, for instance, is a good option if your business solves a community problem.
Credit unions. These providers are cooperative, non-profit institutions that have several economic deposit funds in a member-owned space. It’s basically a lending by entrepreneurs for entrepreneurs, comparable to a small bank. The members of a credit union create the policies, elects the board and are joint owners as well. They promote solidarity between borrowers and lenders and sometimes serves customers as a bank would. Credit union depends on trust and communication, each participant has an interest in making the union successful so interests are always aligned.
Selling shares. Shares represent part-ownership of a business and if the business trades profitably, all shareholders will get payments in cash, which is called dividends. Equities is another share market term for shares, which also represents part-ownership of a business. For instance, you can finance business expansion by selling 25% of your business to an investor. Say your business is valued $1 million, 25% would be $250,000 of capital to fund the expansion. The investor will also be entitled to 25% of your profit.
Venture capital. A high-risk capital which is directed towards young or new businesses with prospects of quick growth and high rates of return. This type of loan isn’t just only about money, but also of time and skills. Venture capital businesses will provide capital for development and research of a business idea, early stage businesses, later stage finance, expansion, and buy-ins of established businesses.
Alternative lenders. The small business online lending market is hugely popular in Australia as well as worldwide. Online lenders have grown about 175 percent yearly, compared to a decline of about 3 percent in the traditional banking sector. You can compare unsecured business loans to see a comprehensive comparison of banks and loans provided by alternative providers.
Unsecured business loans are types of loan that doesn’t require a collateral. The lender will only ask for basic business information, your personal information and previous earnings to determine if you can be granted a loan and how much. A good choice if you want to retain full ownership of your business.
So, what type of business loan do you think is the most applicable for your business? Share it with us in the comments below!