There are countless stories doing the rounds these days about start-up tech firms and other small businesses that have burst onto the scene and changed the world. Very often, these companies have been shown to start out by getting funded. They scream to life via a crowdfunding project on either Kickstarter or IndieGogo and break all kinds of records; or they have these big public offerings that make the papers.
But while those are the exciting stories we hear about in the media, the truth is that most businesses get off to much more humble starts. The vast majority of companies will instead simply get their loan from a bank.
Is this a good alternative? Let’s find out.
Why a Small Business Loan Might Be Right for You
So there’s crowdfunding. This is a great idea on paper, but it’s not going to be suitable for every type of business.
In case you’ve been living under a rock, crowdfunding means that you’re going to share your big idea with the world and then hope that there is a big enough audience out there that is excited enough for your project that they will agree to fund it and get it off the ground. They don’t get any share of your business for this, and that is what is really appealing for so many business owners. You do usually need to give away some kind of incentive (normally something like a free gift, or perhaps a credit in the final product), but that is the only requirement on your part.
When you combine these factors, the benefits of a crowdfunding are obvious.
But here’s the thing: people will back the launch of a new gadget, or a virtual reality headset that changes the game (literally…). However, they genuinely won’t be quite so excited about your regular hairdressing business or bricklaying business.
And no matter what the business magazines would have you believe, these kinds of businesses make up the majority of the small companies around the world. Most companies are not game-changing. Most are very much ‘ordinary’!
Then there’s the option of going public and selling stocks and shares. Now you’re actually giving away portions of your business, however, which is going to be a big compromise and which will greatly increase the complexity of your operation and taxes. It’s simply not worth it for a business with 6 people.
Of course, other options include loans from family members, bootstrapping with your own finances etc. But all of these also come with their own issues and often involve smaller amounts of money. Credit card loans are far smaller meanwhile and also much riskier and more expensive in most cases.
Getting a Small Business Loan
So, in many cases, you will find that the small business loan is actually the ideal option for you. It’s also the simplest to acquire. When getting a small business loan, you simply need to head into your local bank or visit another lender. Then you will outline the idea for your business, show your projections, and have your credit assessed. If everything goes well, you’ll be able to leave with the cash in hand. And this can even be done online these days!
So yes, a small business loan is a very viable option and great alternative to getting funded. For the hundreds of thousands of businesses that aren’t going to take Silicone Valley by storm – it’s the most sensible option still.
And in fact, it’s also a great option for a number of those tech start-ups too!
