Alternative Sources to Finance a Business

With the growing business landscape, it is becoming increasingly common for businesses to forgo traditional funding methods and embrace alternative funding methods. The reason being that it is difficult for startups to qualify for loans from traditional financial institutions like high street banks and lenders. Though startups are the driving force behind innovation, economic growth, and transforming industries, funding remains a critical challenge for many startups and aspiring entrepreneurs. Luckily, alternative funding options have fueled startups by revolutionising the startup funding landscape. One alternative form of funding that has gained popularity lately is crowdfunding. Platforms like Kickstarter and Indiegogo allow entrepreneurs to pitch their ideas to potential backers who contribute money in exchange for rewards and equity in the company, just like Shark Tank India. 

According to various studies, alternative funding sources grant entrepreneurs access to capital without going through the time-consuming and rigid process of getting approval from banks and investors. In addition, these alternative sources offer flexible repayment terms and often lower interest rates, which is highly beneficial for startups. One of the best examples of a startup that received funding is Uber, a multinational transportation company. The company was able to secure venture capital financing from various sources, such as benchmark capital, first-round capital, and Google Ventures. This happened because the company demonstrated its revolutionary technology, which shook the transportation industry. 

Another notable startup is Airbnb, an American online marketplace that garnered more than $2 billion in venture capital funding from investors such as Andreessen Horowitz and General Catalyst Partners. Many other famous companies, like Slack and Dropbox, have received funding from angel investors to get their businesses off the ground. A recent study by Massolution found that crowdfunding platforms raised $34 billion worldwide by 2015, which is projected to grow to $96 billion by 2025. The data clearly reflects that the scope and demand for alternative funding are developing rapidly due to the ease of fund availability compared to traditional funding. Some researchers recognise alternative funding models exclusively with crowd-funding platforms, including peer-to-peer loans, as one of the top crowdfunding options. 

Businesses that are bootstrapped and don’t have enough funds can attempt to raise funds from potential lenders or the government. Many governments offer grants and subsidies to businesses that are into research and subsidies to support innovation and entrepreneurship. Startups can dive into these funding options to fuel their R&D efforts and achieve business goals. Many other alternative funding options for startups include microlending, angel investing, peer-to-peer lending, and startup incubators. These diverse ranges of alternative funding have helped many startups do their business in the competitive landscape. Each of these funding options has its own advantages and considerations. As a business owner, understanding the fund needs is crucial to aligning with the funding options so entrepreneurs can secure the necessary capital to drive their venture forward. 

Many studies on alternative funding have identified that startups that consider alternative funding options will benefit a lot in the future. Forbes has identified that alternative funding makes it easier for marketers to focus on growing their businesses. Since alternative funding options are more flexible and have less paperwork, they support businesses with full potential. Alternative funding is invested in the growth and sustainability of the business, as success is mutual. It has been disclosed that alternative financiers are inclined to collaborate with established businesses, given their lower risk of default compared to brand-new startups. It is also evident that there is a lack of regulation within the alternative financing sector because this is a new or developing space for businesses. As time passes, alternative financing will become a more viable option for businesses. 

As the startup ecosystem evolves, entrepreneurs should explore alternative funding options to build strategic partnerships and capitalise on the transformative power of innovative funding models. Compared to traditional funding options, startups can embrace alternative funding to thrive, disrupt industries, and make a significant mark on the global entrepreneurial landscape.

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