Alternative funding for your venture
You may well wish to consider alternative funding options to equity finance when launching a new business venture. There are a number of avenues open to you. Here is a quick summary of a number of different alternative funding options that could help launch your business.
Companies who will work for equity shares
A great example of alternative funding are companies that will work in exchange for equity in your new venture. The arrangement works much like a regular investor. The difference being that these companies will provide professional services in return a stake rather than investing money.
These companies always ask for a certain degree of inward investment but if you pitch the idea to them in a professional manner they have the ability to assess the odds and may be in a position to ‘gamble’ their time with a future objective in mind.
Another benefit of starting a business venture this way is that these type of investors don’t tend to ask for as much equity stake in comparison to financial investors.
This kind of “work in exchange for equity” arrangement can be particularly beneficial for internet ventures. For instance say Ebay never existed and you came up with the idea of allowing people to sell their unwanted items in an online marketplace.
You approach a web development company and come away with a quote for $60K/£30K in development costs but you can only get hold of $6k/£3K. Do you let Ebay create the multi million pound enterprise before you have chance?
Edge Venture partner with Image Nation, a web development company who are very much open to this type of proposal they can offer a full remit of services from Web Design and ecommerce development through to Business process development and Internet Marketing.
The Edge Venture system is also available to Online Business Development Consultants. If your idea is web related you may well receive approaches from companies willing to ivest in the venture with professional assistance for relatively small stakes.
Business Loans
There are many options to consider, perhaps a commercial mortgage secured against your existing business assets or a short term loan, over a set period of three or five years. It’s probably good to start with your own bank, your existing bank will be in a good position to merit you for your good standing and track record. Even if your bank offers you a favorable rate it pays not to over look other lenders.
Overdrafts
Overdrafts can be expensive but are a viable consideration if cash flow is the main reason to obtaining inward investment. A major downside with overdrafts is that they are repayable on demand so therefore not really a stable long term funding solution, but a viable alternative funding option nevertheless.
Family Loans
This option has its advantages and drawbacks, it can be good to get family involved when launching a new venture as they may well be very supportive of your goals and ambition and have faith in your ability to succeed. However the downside of family borrowing is potential damage to family relationships if you do not repay the debt on time.
Government support
There may well be various grants and investment funds available to you in your local area. There are often government initiatives to promote enterprise and development in your region. Your local Business Link are probably the best place to seek advice about the availability of such grants and funding, and any eligibility restrictions.
Joint Ventures and Strategic Business Alliances
It may well be advantageous for you to research potential Joint Ventures with allied business in your sector. Leveraging other peoples contacts is an excellent way to break in to new markets and launch a new product or service.
For example you may be launching a fantastic new widget but you need capital to advertise this widget. If you could strike a strategic business alliance with a supplier of widget holders who has an existing customer base you can test market a product and generate sales which will in turn give you revenue for your own marketing efforts. This is a good example of a creative approach to alternative funding.
Investors like risk takers
Investors have an affinity with Entrepreneurs who source alternative funding off their own backs. If you have personally invested money to bring to the venture this will stand you in very good stead with potential investors as it proves to a certain degree your passion for the business idea. The fact that you are willing to make yourself personally liable for business losses also shows an investor that their money is in safe hands.
Even if you are seriously considering alternatives to equity finance it is still worth pitching your idea using Edge Venture. It is great to get possitive feedback from investors and the feedback you receive will be worth it’s weight in gold as it is a better indication of a businesses viability than much of the market research that costs thousands.
