I wrote last week about the fact that over 50% of all business financing does not come from banks in direct contradiction to popular belief.
Business financing has more to do with the creativity and ingenuity of the entrepreneur and business owner seeking out sources of financing that can get value above and beyond an interest rate on a loan.
And guess what?
Banks also fall into this category.
There is virtually no bank or lending institution out there that wants to just make loans to you. Their objective in giving you a loan is to help maintain the investments, insurance, and services they have with you which tend to be far more lucrative than any potential loan profits.
But by saying that business financing comes from non bank sources, I’m continually asked for more examples of this.
Here’s an article the talks about one additional source of capital for business which has been coined “crowd funding”. http://www.theglobeandmail.com/report-on-business/your-business/start/financing/need-financing-join-the-crowd/article1974748/&/
Crowd funding is an off shoot of the social network movement where entrepreneurs and business owners can ask for “donations” to fund a very specific project outline.
All proceeds provided to the business are done through donation to stay within the requirements for investing governed by the securities and exchange commissions in different geographies.
In order to entice donations, an applicant for funding can provide other non monetary rewards such as fresh baking, acknowlegement of contribution on a product, etc.
The donation amounts can range from a couple of dollars to hundreds and thousands of dollars.
The growing success of this type of funding method has a lot to do with the donator getting hooked on the business owner’s story and wanting to be a part of it.
All that being said, there are also those in crowd funding that do want a monetary return.
For these individuals, territory licensing agreements are just one example of what they are receiving for the money they may put in.
While this is not likely going to be able to raise $100,000’s of dollar for a project, in many cases people are looking for $5,000 to $50,000 which can’t be secured from any type of bank financing option.
I’ll pass more real world examples of non bank funding as I come across them.