Raising money through debt is perhaps the most common way to get business capital. Starting a business has list challenge yet not can really measure up to the idea of raising money. It doesn’t matter how good your idea is or how creative your business sis, if you don’t have the money to take it to the next level then you won’t make any headway. For the last few years the idea of raising money through private debt has been encouraged. As banks and venture capital firms become more stringent in the way they offer loans to startups, private lenders are stepping up to the plate and playing a significant role in helping small businesses raise the money they need. However, there are some challenges and here they are:
Unless you are borrowing a loan from a multi billionaire, then you can never be too sure you’ll get the money that you want. This is the biggest concern for private debt. What you get is at the discretion of the lender and of his or her financial status. The banks would do better in this regard. Since they have substantive deposits, they are likely to have enough money to fully fund your startup regardless of the amount you are looking for.
Some Level of Risk
When you are borrowing money from a bank you are basically dealing with an institution. However, with private debt you are dealing with an individual person. It’s very difficult to know exactly what to expect. At times you may land a good lender who understand and believes in your idea or someone who just want to make a quick buck. In this particular situation, you must always act smart and ensure that the people who are coming board as investors are people who add more than just the capital.
Finding a lender ready to offer a private loan is another challenge. It’s not like the mainstream banking sector where you can wake up in the morning at 8 AM and step into the first bank you come across. Although peer to peer lending sites such as Toborrow.se are making it easier for lenders and entrepreneurs to meet, in the absence of these platforms it would be very hard to know who is ready to offer you the money you need.
May Take Longer Than You Think
Although private debt has often been marketed as a way of getting quick loans for business, if you are able to clearly articulate your business and how it will move from one place to another you may take longer to close a deal than you had planned. In addition to this, you may need to put together more than one investor in order to raise all the money you need.
Despite these challenges, there is a no doubt private debt still offer a great option for you to get capital for your company and the only thing you need is a good peer to peer site and a great salesmanship skill.