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Money is at the centre of any business. Without a big chunk of cash, you can't start your own business and make it a success. If you're lucky, you'll be able to save that money yourself but that isn't manageable for most people. Usually, you'll have to find funding from somewhere. Traditionally, all of the power was in the hands of banks or wealthy investors and it was up to them to decide whether they would give you the money that you needed. But in recent years, that dynamic has started to change. The internet has opened up so many new avenues for funding which give power back to the business owners and their customers. Could this mean that the world of business funding is going to change for good?
The Rise Of Crowdfunding
Crowdfunding is a way to put power in the hands of the customer and let them decide which companies they want to succeed. The main benefit is that you aren't asking one person to risk a huge amount of money. You're just asking a lot of people to risk a tiny amount, usually in exchange for a product. You can gauge whether the idea is going to be popular before you invest a huge amount of money in it. It makes starting a business a lot safer and gives companies more freedom to create products that traditional investors would consider too risky.
Peer To Peer LendingPeer to peer lending lands somewhere between crowdfunding and traditional loans. Instead of going to an organisation, you can find individuals who have money that they want to invest. They're more likely to take a chance on an unusual or innovative business idea which is good news for entrepreneurs. Visit for a list of the best peer to peer lending sites right now.
Is Traditional Lending Obsolete?Do all of the new, less restrictive funding options mean that traditional lending streams are obsolete? Not quite, because there are some major downfalls with these new forms of lending. Peer to peer lending, for example, often has far higher interest rates than traditional business loan companies like www.smallbusinessloans.co which is bad news for companies, especially in the early days when they've got a limited amount of cash to play with. You're also not likely to be able to borrow as much money, after all, an individual doesn't have the same lending power as a financial organisation.
When it comes to crowdfunding, there are problems too. In the early days, it was a lot easier for ideas to get the backing that they needed and there have been some great success stories. But in recent years, the sites have become saturated. With so much competition, it's only a very small percentage of projects that get the backing they need. There have also been some problems with customers not getting the product that they were promised in return for their investment, which is putting people off.
Even if those issues are solved, traditional lending isn't likely to die out completely because it has one major upside that isn't to do with money. The thing that you miss out on when you're using crowdfunding or peer to peer lending is the business expertise of somebody that has been doing this a lot longer than you, and that will always count for a lot.
