Entreprenurs Can Ignore the Allure of Venture Capital Money
The Internet has been a great place to start up a company and achieve overnight success. It is often revealed that most of these web ventures have acquired some sort of secondary funding on top of their own personal seed money. This secondary funding usually comes from venture capitalists, and it comes at an enormous price. Sometimes these tech business owners give up as much as half or more of the company. The large fees involved with getting additional working capital for the second and third phases of a company’s growth has led some of these entrepreneurs to seek funding outside of traditional channels.
One of the most popular options today for these tech savvy entrepreneurs is business loans from online private business loan providers. The lending companies are usually groups of individuals that pool their own private money in order to build a portfolio of high interest loans. Although these business loans come at a higher price than bank loans, they help both parties achieve significant gains. For instance, the business owners do not have to part with any piece of their company. This makes the premium price they pay insignificant in the larger picture. Also, the lenders, although they take a lot of risk they develop portfolios that can constantly outperform a variety of markets.
There is one major obstacle for entrepreneurs looking to receive funding. The business loan can only be given to existing businesses that generate cash flow. The borrowing business does not have to be profitable, it just has to generate consistent revenue. This means that any startup in the early stages is not likely going to be eligible unless the company has money coming in. This is actually the only major deal breaker because the entire funding process is fast and extremely flexible.
Unlike the business funding process with venture capital firms, banks and other traditional financing outlets, private lenders require minimal documentation, no collateral, and there are very lax credit requirements. Credit history is such a minor part of the application process because the funding is being provided based on the business fundamentals. As a result, there have been business owners that have had sub-500 FICO scores that have received business funding. This flexibility with credit requirements also lessens the need for documentation. So some bank statements and a few documents to verify ownership often suffice. The combination of flexibility and low documentation makes applying for business loans with private lenders fast and easy.
Business owners that launch online ventures no longer need to rely on venture capital to build their business. Many entrepreneurs are acquiring business loans online in order to avoid the hefty percentages demanded by the venture capitalist firms. Although these online business loans come at a premium, the overall cost is much less than the stake that would be lost to venture capitalists. The business loan application process also has extremely flexible credit requirements making this financing option optimal for any business owners that have been denied funding from traditional sources. If you own a new and exciting startup you no longer are relegated to giving up half your company just to get working capital, private lenders are a relatively new solution to build a successful company and at the same time maintain ownership equity.