Show Me The Money!
Starting or even running a small business often requires you to explore multiple options for capital, so once you’ve exhausted your local resources where do you go next? Where banks are scaling back it seems more and more opportunities for private money are popping up. We will look at two venture capital and/or angel money sources and two private people to people lending websites.
A couple of investor-entrepreneur connection websites that may fit your needs are the GoBIGNetwork.com and RaiseCapital.com. Go Big Founded in 2006, already has 70,000 start-ups and 4,000 investors online. They also boast that 82% of the Member Requests that are posted to the system are responded to. RaiseCapital.com started in 2007, lists over 2,300 investors on their site and does not give any other statistics from there.
Both online fund generation portals are free to join but then charge you for upgrades and or premium services, they both also try to supplement the investor-entrepreneur connections by offering links to business resources, news, and communities. Members of Go BIG can either search profiles of other members and contact them or they can post a request (like a classified ad) and let other members see what they are looking for. Members pay a fee to post their requests and to contact other members of the network who they do not have a relationship with. As a member seeking capital on RaiseCarpital.com, you will be able to market your venture to investors using text descriptions, pictures and/or streaming video. Additional free benefits include your own posting blog, a counter that allows you to see how many people viewed your post, a unique URL for your venture, and premium services such as showcase, feature and highlighted posts.
Where Go Big is more basic with text style classified ads, RaiseCapital.com allows you to use pictures, video, and text in your posts which are useful in giving potential investors an inside feel for you business. Go Big has more business resources to offer, with job postings and service provider communities.
So you’ve looked at the investor route and don’t want them messing with your business let’s look at private loan scenarios. Two private loan websites to consider are LendingClub.com
which bring individual borrowers and lenders together. Lending Club is a social lending network where members can borrow money and lend money among themselves at better interest rates. LendingClub.com bases loan rates on the borrower’s credit profile borrowers get low interest rates, and lenders get better returns. At Prosper.com, parties on both sides negotiate the rate, though borrowers can set a maximum they are willing to pay. The companies oversee loan repayment and provide all the necessary paperwork. Some borrowers have found this is an easier way to get money, at more favorable terms, than through traditional sources.
Both of these sites are free to join and connect on, their fees start when a deal has been struck and the loan needs to be drawn up and disbursed. There are fees charged to the borrower, lender, and collection fees should the borrower stop paying. Fees for the borrower range from .75% of the loan amount up to 3% depending on the borrower profile and website. A 1% servicing fee is charged to the lender on both sites, and collection fees vary should these services be needed. Interest rates also differ depending on the site and the borrower profile, Lending Club sets the rates on the borrower profile, while Prosper allows the borrower and lender to negotiate terms.
So if you have found that your local bank, government, grant program, or local investors are not interested in your business you may want to take that leap into the Internet world and see what can be found online. The results may surprise you.