Funding for start-ups is prodded with new ideas. Some old ideas are also rejuvenated in a new way and some are absolutely new. Five financing trends of 2011 appear to be dominant and will leave an impact on companies.
- Crowd fundingThe idea of Crowd funding has been popularized by Kick starter. It means a large group of people working to fund a project through a cluster of small donations Kick starter started the process by providing help to artists so as to get projects off the ground. The donors in return get goods and services for offering equity and interest payments. This idea is becoming popular in business ventures now. Diaspora, a tech company got more than $200,000 in seed money because of a campaign conducted by Kick starter.With crowd funding, backers always get something in return apart from equity. Catwalk Genius for example is one company that offers funds to fledgling fashion designers and in return it gets revenue share generated by the designers. The other player in this category is ‘Indiegogo’ that helps creative and tech business ventures.
- BootstrappingThe concept of ‘Bootstrapping’ means to make use of one money-making venture in order to fund another. For this purpose, one may tap on personal savings, hit on friends and relatives and provoke vendors to start supply for delayed payment terms.
- Credit UnionsThe National Credit Union Administration (NCUA) has found out that the cooperative financial institutions or (credit unions) are among the most active for offering small loans. Business loans worth more than $33 billion have been provided by credit unions in 2009 that is a straight increase of $ 12 billion from what it was in 2004. Their default rate and terms are found better than traditional banks. They have also become a resource for business owners whose credit score does not meet the requirements of big banks.
- Micro lendingMicro lending helps people start small business ventures as it offers small loans that are even as small as $100. The popularity of micro-lending has spread to the US in the wake of entrepreneurs starting business ventures with less than $50,000 business loan. Acion is the largest organization that introduces micro financing with loans starting at $500 and averaging more than $5,000. The Association for Enterprise Opportunity’s searchable database is a good means to research on micro lending programs across the US.
- A Movement to Generate Money for Agri-Based EntrepreneursInvestors’ Circle is taking forward this movement. Its ambition is to make at-least one million American invest 1% of assets in local food systems by the next decade. This will help entrepreneurs engaging in local food and agriculture to find the seed funding. The terms for this money movement are based on a deal-by-deal basis that can range from loan, equity and credit extension. People who support the movement are encouraged to invest in ventures that will bring profits to the community, create jobs, support local businesses and foster local food chain.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to