*How and where to start fi­nanc­ing your startup project

Oman Daily Observer - - PERSPECTIVE -

One of the big­gest prob­lems when it comes to start­ing a busi­ness is surely a mat­ter of money. How to get started with fi­nan­cial re­sources and start? You might think it’s crazy to think about start­ing any deal, if you do not have the money you need to in­vest. But if you have a good idea and a su­perde­signed busi­ness plan that you are sure to suc­ceed, you should not give up on it. There are ways to get to the fi­nan­cial means.

In fact, this step is just the first ob­sta­cle you will en­counter in busi­ness. Chal­lenges will be much any­way. Prove your­self to be able to fight them from the very be­gin­ning. If you over­come it, then you are quite ready to con­tinue with your idea.

For­tu­nately, there are sev­eral ways to start a startup with sev­eral sources of money. Some will be re­paid with in­ter­est (for ex­am­ple, cred­its), some will be given to the ac­count of the share in the com­pany (sim­i­larly, there are big joint stock com­pa­nies that give as a re­ward par­tic­i­pa­tion in profit, the so-called div­i­dend) and there are some ways to get free and non-re­fund­able money.

UN­LIKE LARGE IN­VESTORS, CROWD­FUND­ING IS BASED ON THE CON­TRI­BU­TIONS OF IN­DI­VID­U­ALS, COM­PA­NIES, AS WELL AS LE­GAL EN­TI­TIES WHO WANT TO CON­TRIB­UTE TO PROJECT.

If your startup idea is ready, then pay at­ten­tion. Here are some tricks how and where to start fi­nanc­ing your startup project.

Start­ing any busi­ness is not an easy task, if you have an idea, it’s mostly lack­ing in money. Start­ing a busi­ness with­out your own cap­i­tal is pos­si­ble. There are many ways to get the nec­es­sary funds, but one of the most in­ter­est­ing is Crowd­fund­ing.

Crowd­fund­ing rep­re­sents a spe­cific form of fundrais­ing for start­ing or de­vel­op­ing a project. Un­like large in­vestors, crowd­fund­ing is based on the con­tri­bu­tions of in­di­vid­u­als, small and large com­pa­nies, as well as all other in­ter­ested in­di­vid­u­als and le­gal en­ti­ties who want to con­trib­ute to project.

Nowa­days, ideas are more valu­able than money. A good idea in the short run can make some­one a bil­lion­aire, or a suc­cess­ful in­no­va­tor, per­haps a so­cially re­spon­si­ble model. How­ever, reach­ing fi­nan­cial re­sources for its re­al­i­sa­tion is not al­ways that sim­ple. Crowd­fund­ing as a form of group fi­nanc­ing can help you in this. Pro­mot­ing ideas from any area, through a well-con­ceived cam­paign through cer­tain In­ter­net plat­forms, of­fers the finest pos­si­bil­i­ties for ac­quir­ing the de­sired start-up cap­i­tal.

Crowd­fund­ing is based on the fi­nan­cial con­tri­bu­tions of tens, hun­dreds, or thou­sands of dif­fer­ent peo­ple who will give you small amounts to help you (the amounts can lit­er­ally go from $ 5 to the top). It’s very im­por­tant to think of a good rea­son why th­ese peo­ple would give you money.

The Crowd­fund­ing model on the In­ter­net evolved in sev­eral di­rec­tions:

Lend­ing funds for the re­al­i­sa­tion of pro­jects. A typ­i­cal ex­am­ple of this ser­vice is Kiva.

The most fa­mous ex­am­ple of this ser­vice is Kick­starter. At such plat­forms, crowd­fund­ing en­trepreneurs com­monly set a fund­ing tar­get for their project which serves as a thresh­old. The project gets funded only if the tar­get is reached within a spec­i­fied amount of time.

Project fi­nanc­ing by com­bin­ing the sale of perks and do­na­tions. The best known ex­am­ple of this ser­vice is Indiegogo. Indiegogo has helped thou­sands of com­pa­nies raise over a bil­lion dol­lars in perks cam­paigns.

There are a mul­ti­tude of crowd­fund­ing fundrais­ing plat­forms, but cer­tainly two are ranked as the most in­ter­est­ing and pop­u­lar plat­forms in terms of in­vest­ment be­cause they do not re­quire you to give a stake in your com­pany/project to get funds, th­ese are Kick­starter and Indiegogo.

P2P lend­ing is an­other In­ter­net op­tion to get money for your startup. Money providers are not banks, but pri­vate in­di­vid­u­als (hence the P2P name, or peer to peer, which would mean a per­son-per­son). You do not have to know th­ese peo­ple, nor should they know you. Peer-to-peer lend­ing re­moves the mid­dle­man from the process, but it also in­volves more time, ef­fort and risk.

In re­turn, you do not give them a share in the com­pany, but you re­pay the money with in­ter­est, as would be the case if your bank ap­proved the loan within the ap­pro­pri­ate time limit. You need to leave your ap­pli­ca­tion on the plat­form, and then the cred­i­tors them­selves assess whether they will give you money. In sim­ple terms, P2P lend­ing hap­pens when an on­line plat­form matches lenders with peo­ple or com­pa­nies look­ing to bor­row money. Such a plat­form is, for ex­am­ple, Pros­per.

Peer-to-peer loans rep­re­sent a new way of fi­nanc­ing, cre­ated in 2005 in the Bri­tain. In con­trast to clas­sic bank­ing, the peer-to-peer lend­ing in­vestors are look­ing for an op­por­tu­nity to in­vest and com­pete for this op­por­tu­nity by of­fer­ing what less in­ter­est rates through the auc­tion. In this way, a lower in­ter­est rate for debtors is achieved.

The four best P2P lend­ing plat­forms in­clud­ing their de­fault rates, in­ter­est rates, and other im­por­tant met­rics are Lend­ing Club, Pros­per, Up­start and Fund­ing Cir­cle.

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