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The Truth About Business Loans and Merchant Cash Advances

In the previous part-2 of this multi-part article series we discussed the attributes of bank funding for small businesses. Now we will expose a few characteristics of private funding.

One great quality of private funding is that it is available when other sources are not. There are a few private funding sources that I’ll touch on, some informal and others more professional. Let’s start with the obvious your family and friends. Your inner circle is the most informal funding source. You won’t need to fill out applications nor provide income statements and tax returns, and you probably won’t be charged any interest, or at least a low rate, which of course is great.

In reality though, most of our family and friends won’t have the amount you would need to remodel your store or to purchase new inventory for the holiday season. Even if they did most family & friend loans end up a mess. Informal accounting between the parties is usually where it all unravels. Someone gets accused of mishandling funds, and then it all spirals down from there. Many relationships are severely and permanently damaged because money. It’s just not worth it.

Private Crowd Funding:

One of the latest resources that recently emerged is known as crowd funding. Typically used by start-up companies because a long track record of your experience or credit history is usually not required. Crowd funding is a method of financing where you, the business owner must create a marketing campaign that may include flyers, brochures, videos or any other advertising materials to convince or sell your idea to online investors (donors) who will give you donations for your business goal.

If you are a great salesperson or you have strong marketing background this method is for you. However even you don’t, there are crowdfunding experts you can hire to produce your campaign for fee. The fees for this service will vary.

Again this sounds good, however one drawback is that if you don’t raise the amount you are requesting, let’s say $50,000 to update the kitchen in your restaurant, by coming up short at $49,000, you will not receive any of the funds, in some cases. Check with a few crowd funding sources to find out their guidelines.

Another disadvantage and probably the most potentially detrimental is that you and your business are completely exposed with total transparency. Your business plan and financial statements are literally open to thousands of people (donors) online. Most crowding funding platforms accept donations as low as $5-$25. Being this affordable, your sensitive information could be exposed to people with bad intentions. Again check the guidelines of the particular crowd funding source.

Furthermore, with crowd fundraising you give away a percentage of ownership of your business. This would not be so bad, as long as you were gaining an experienced investor to help guide you like “Shark Tank” ABC’s hit show.

Very few crowd funding offer experience, if any at all, that’s why I highly recommend this business resource because of it’s reputation and it offers multiple sources of education, idea conception, and financial backing all by experienced entrepreneurs. In fact, one of the founding members is a former “Shark Tank” guru. If you need assistance from beginning to your “Grand Opening,” the contact info will be at the end of this section.