Launching any kind of business is challenging. There are many hurdles along the way, which is why many startups struggle to survive their first two years in business. The most common challenge faced by entrepreneurs is financing. Without the required funds, it’s impossible to provide customers or employees with a good experience.
Why Is Financing Difficult For Entrepreneurs?
The main issue with lending to entrepreneurs is, of course, high risk. With startups, lenders have no prior history to go off and little confidence to hand over funds. Since 50% of all startups fail, lenders are generally iffy about lending to these businesses. Traditional banks are particularly wary of approving loans to startups because of the high chances of failure.
Why Is It More Difficult To Obtain Loans From Banks?
The banking industry is highly regulated. The central bank controls major decisions on behalf of the industry , which means that it also regulates lending. The banking model is such that it needs to have a high reserve to cater to consumers, which means there are fewer funds available to loan for commercial needs.
Traditional bank loans are also very complicated. The paperwork is extensive, and it can take months before you’re given any verdict on your application.
Types of financing new entrepreneurs can opt for:
Venture capital has traditionally been associated with entrepreneurship and small businesses. It’s a form of private equity that finances businesses with potential. Well-off investors, individual and institutional, put their money into the business in exchange for equity in the venture.
Venture capital is not only risky for investors but entrepreneurs, too, since it takes away control of their company. Investors can make changes as they like since they have a significant stake in the company. From an entrepreneur’s point of view, venture capital isn’t ideal, especially if your business idea is unique and hasn’t been done before.
Private lending has become a popular choice among commercial clients. Private lending offers entrepreneurs a wide range of financing options, competitive rates, and flexible terms. When compared to traditional bank loans, the process of applying for private loans is much easier, and you get a verdict within weeks. Hard money lenders like GCP Fund approve loans in up to 7 days since these loan applications are approved by a single agent.
Global Capital Partners Fund is a private lending firm based in New York. They offer hard money lending services in New York, Columbia, SC, Atlanta, GA, and many other cities. Get in touch with their agents today for hard money loans.