Many brilliant ideas have begun as startups. From apps to delivery services to applied technology, new companies are changing the way customers live and work. If you have a great idea that could potentially fill a vast need, you may be considering investing in a startup.
However, every new business needs funds to get off the ground, and you may not have enough capital to fund it yourself. If you seek a loan, banks may not be comfortable lending to you if you have little or no history as a business owner, or if your business structure is nontraditional. Fortunately, there are alternative commercial real estate financing options to get you the funds you need.
Joint Venture Partnership
If you don’t have the capital to start a company on your own, you still have options before turning to a third party financer. Existing members of your equity group can offer their capital, or you can bring in individuals to act as financial partners.
The first option can be straight-forward, with each member of the equity group contributing. This way, all members share the risk. Depending on your agreements, equity group members may contribute different amounts if they have other valuable contributions, such as expertise or experience. Sharing risk can also minimize the impact of any losses.
The second option relies on one person or specified individuals to act exclusively as the financers, rather than spreading the financial burden around the group. The workability of either option may vary from business to business, and can be effected by the business structure, partners’ accessible capital and availability of other financing options.
An increasingly popular type of commercial real estate financing is crowdfunding, which generally requires the use of an internet platform such as Kickstarter, Indiegogo or GoFundMe. Creators can post a description of their project on the website, along with a goal amount and deadline. The funding is all or nothing, so if the project doesn’t reach the goal by the deadline, the donors receive their funds back.
Crowdfunding relies on a large number of people giving relatively small amounts, so this financing source works best if the creators already have a large online following or if the project goes viral. Since creators can to appeal directly to consumers for capital, this type of funding can allow project creators an immense degree of freedom in how they choose to produce, market and distribute their product or service.
There are myriad forms of commercial real estate financing, especially with the advent of the internet. If traditional financing isn’t feasible for your project, alternative financing options may be the answer.