Whenever we discuss business funding, the traditional sources of finance such as banks and financial institutions come to our minds. The traditional methods of funding by taking business loans suit businesses that meet the set standards of the risk model as envisaged by the lenders. However, if the business emanates from some new ideas and treads the unconventional path, then the traditional lenders would not be eager to fund the project, as they are not sure of its viability. Usually, traditional lenders have a template for businesses that they consider for financing and any business proposal or project that deviates from the fixed pattern do not find favor with them. New inventions and innovations that need funding for starting up, like any other businesses, have to seek other non-conventional methods of funding like crowdfunding.
It is not only during startup that businesses need proper funding but also during running the business you have to pump in money to support the growth prospects. At this stage also, non-traditional methods of funding are the only ways for supporting some specific businesses like those of real estate agents, travel agents, and insurance agents. In this article, we will take you through the non-conventional funding tools like crowdfunding and realtor loans commissions, which are attracting entrepreneurs for funding businesses belonging to some special niche.
The approach in crowdfunding
Crowdfunding is the method of approaching the public at large for raising money to fund business. By collecting small sums of money from individuals in the form of donation and by convincing a large section of people to donate, you create a huge corpus of a fund that helps to start up the business venture. The proliferation of the internet has made it possible to create online crowdfunding platforms for reaching out to a large section of the audience, tell them about your business goals, how you would like to use the funds and then persuade them to donate for the project. The method has not only helped businesses to find an alternative method of funding but has also opened the gates for creative persons like musicians, artists as well as non –profits to garner funds for converting their innovative and creative ideas into business modules to generate money.
The modality of working
For launching a fundraising project by using crowdfunding, you must first register with a crowd-funding platform. There are hundreds of websites, and you can pick one by researching online. However, you have to give something back to the donors for their support. This could be in the form of rewards that make them feel special. You can even offer them the product or service free or invite them to participate in the process of designing the product or service. It is a way of acknowledging their goodwill gesture and expressing your intention of building some relationship with them by involving them at some stage of the project. Another way of rewarding donors is to offer shares of the company so that they not only become a part of the project but also earn from the profits that the venture makes.
Pitch your business plan to the masses
Crowdfunding provides immense opportunities for garnering funds as you approach the masses with your business. It has proved to be a very potent strategy for funding startups, especially if the project hinges on some innovative ideas that defy the traditional model of business. You avoid the hassles of availing loans, which can often make you go in circles and frustrate your efforts and initiatives.
Ongoing business funding through advance commission
Having started up the business, you need finance for keeping it running and ensure that the cash flow is smooth. To meet the needs of finance on an ongoing basis, instead of taking loans, you can think of putting back into business whatever you earn from it. It requires a quick recovery of outstanding payments. Real estate agents, who earn from commissions, secure their earning when they strike a deal but receives the money much later when the deal closes. To cut short the delay in receiving commissions, real estate agents can approach commission advance companies and sell a significant portion the secured commission to them for a discount so that they receive the cash immediately. The sooner they receive the money, they can put it back into the business to ensure its smooth running and capture the growth opportunities that come its way.
More and more businesses are taking the non-conventional routes of business funding by relying on their strength for garnering funds without taking loans. It provides a unique opportunity for attaining self-sufficiency in business funding without relying on loans, which often ties up the business assets as collateral security and puts a lot of pressure on entrepreneurs.