Fundraising has always been an issue for startups all around the world, not only in the UK. The UK has some particular issues related to fundraising if you don’t have family or friends to help you in arranging the money. A wrong perception has been created by the media that there is a lot of money in the British market for budding startups and investors are waiting for the right project to arrive.
At some extent that is true. While there is money in the UK, it is not easy for startups to get access to it. Traditionally investors in the UK are very risk-averse, and most of them look for only tax benefits, so financing momentum here is very slow.
Other avenues to get the fund are online lenders who provide fast loans with no guarantor or collateral.
There are two categories of loans they offer: Secured Loan and Unsecured Loan
- In a secured loan, the lending agency provides you the fund in exchange for some collateral as security. This may be in the form of house, valuable property or assets. The only reason behind asking for collateral is to avoid the risk in case of non-repayment.
- On the other hand, an unsecured loan is a type of fundraising option that allows you to get fund for your startup without any collateral. Approval of this type of loan is also fast and easy. A major benefit of raising capital through it is that you don’t have to worry about providing collateral to secure your loan. This feature i.e. no collateral makes it a popular option for entrepreneurs to raise fund for their business.
What is the Role of Banks in Fund Raising?
Traditional banks offer various kinds of loans for new entrepreneurs who are looking to raise capital for their startup. Depending on your business and requirement, you can take short term loans for small need, large scale loan or startup business loan.
Nowadays, banks are offering online loan application process to provide you a more convenient and fast service. Banks reserve the right to accept or reject your loan application.
Although fundraising from the bank is not an easy task. You have to satisfy all their criteria to get it. They are more concerned about your credit score and income stability.
If your credit record is good then it’s easy for you to get the financing.
But what if your credit score is bad? Will you stop the idea of having own business due to lack of fund?
No such thing is going to happen. There is always some way to get out of it. Here come the marketplace lenders to help you.
Marketplace Lenders: Alternative of Banks
Marketplace lenders are the alternative of traditional banks and provide loans to borrowers even if they have a poor credit record.
Without a credit check to worry about, the process is very fast. You don’t have to provide too much detail except basic information and bank account details.
Since there is no credit check, the risk to lenders is very high. As a result, the rate of interest is a bit higher compared to traditional loans. Yet the best thing is that it is fast and convenient.
All of the complexities and red tapes have been removed from your way. Getting the fund is easy but you should compare the rates from different lenders before applying.
Flexible Repayment Option
The repayment option varies depending upon lenders. If possible pay it off in one go. If you are looking for a small amount for money, this may be very easy to do.
However, for the large amount you need to pay in installment over a long period of time. This means you have to pay a small amount at a regular interval. If you fail to do so then you can get trapped in a credit cycle.
So it’s better to pay back on time. It will improve your credit record which will help you in getting a loan in the future.
Fear of Failure
Failure is very crucial to startup culture. Many startups begin every year and many closes due to various reasons and fundraising are common to all.
But the fact is most successful companies have dozens of failure behind their success. Maybe it is traditional thinking of investors or lack of startup ecosystem in the UK, failure is considered as a demon for entrepreneurs.
In the UK, people are scared of failure in such a way that did not allow the startup culture to properly grow.
Fail very often but fail fast. We say that the failure is opposite of success but that’s not correct. Failure is part of success. Learning to fail is one of the most important skills for an entrepreneur to develop and it comes with practices.