If you are like most entrepreneurs, your passion and the need to make a profit drove you to set shop. Unfortunately, within months of setup, you realize that you need to raise money yet you lack collateral to back your loan application. You, just like the 49pc of small businesses in deep debt, need a debt financing option to prevent the closure of your business.
As you shop around, you’ll come across the following options:
Venture debt financing
Venture capitalists are professionals in investment organizations who invest in small businesses with high potential for growth. These capitalists are risk takers and often look to invest in startups with prospective disruptive products and services.
Venture debt financing gives you the chance to achieve more balance in business through an affordable capital structure. This comes with little or no capital dilution. It also frees up capital for research and development, marketing or talent employment. Direct links to investors are provided by venture debt financing.
Angel investors are the individuals who have a keen interest in the prosperity of your business. Therefore, they will determine the percentage of the stake they wish to get from your business. An angel investor may approach you and you may also have to approach them and convince them to give you their money.
Peer to peer lending institutions
There are many lending institutions online formed by individuals who pool their resources together then extend credit to you at an interest, often lower than the bank’s interest lending rates. Most peer to peer lending institutions consider your credit score before lending to protect their interest by lending to you at high or low interest rates. For your debt management, these sites will extend very affordable loans compared to your normal bank.
Besides the normal lending clubs, you’ll also come across the Bitcoins peer to peer lending institutions with affordable interest rates.
Debt consolidation loans
Debt consolidation is a debt management strategy that involves putting together your individual loans/ debts into one big but manageable loan. By consolidating your multiple personal and business loans, you remain with one loan that comes with manageable monthly repayment plans. If you feel that your business is straining under the pressure of the multiple business loans and your personal and student debts, you should consider this option. Debt consolidation is a light debt management system.
Most governments give business grants and even when interest is charged, it is often very low. You should therefore send your application together with your business proposal. There is a high chance that your application will be approved.
Enter a competition
There are may competitions that reward the businesses or individuals with the most innovative business ideas. Rather than losing hope and killing your business dreams, get into one or more of these competitions. The reward money will go a long way in repaying your debt.
Ask for your friends’ or family’s help, strangers too
Pitch your business to your friends and family as well as strangers through networks like Go-FundMe. If you have a great idea and a business worth reviving, you will find the money needed to clear the debt.
In conclusion, do not let your business close because of debt; manage your expenses and use these tips to pay off debt and grow your business.
Luther Mathews is a business consultant and debt management officer. To learn more on debt,startups and funding, check out his LinkedIn profile.