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Direct Funding is Ideal for Startups Looking Beyond Banks for Credit - To Duhs
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Direct Funding is Ideal for Startups Looking Beyond Banks for Credit

In: Business

Fintech and Banks: Four Ways Banks Can Respond Better | Toptal

There is a lot of talk going on about the startup ecosystem, angel investors, crowd funding and of course, venture capital funding. All these are capital market jargons related to tech-startup funding for which the big banks and other traditional lenders are not compatible sources of credit. There’s another kind of business that are younger than startups, called bootstrap firms, which are nothing but early stage startups, and are less than three years old. Startups come by thousands and also vanish from the scene by the thousands as the failure rate is very high. Not all failures are due to incompetence of the entrepreneurs and in many cases it is due to lack of funding from traditional sources. Such startups can look up to direct funding

Startups are bustling with energy and ideas 

Startups are storehouses of raw energy and youthful exuberance that can transform into powerful enterprises with proper fiscal guidance and most importantly, reliable funding. However, there are also some startups where the only objective of the founders is to somehow get the funding as if nothing else matters to them. 

Coming back to mainstream startups founded and managed by serious young entrepreneurs, the biggest challenge is funding and fiscal prudence. Since traditional lenders avoid them, the best option is to seek small business funding from direct sources. Such lenders mainly look at the viability and scope of the business to generate profits and startups generally have great business projections.  

Startups need elbow room to maneuver 

One of the main problems that startups face with VC or angel funding is that in a lot of cases these are available at the cost of equity. In most cases, such funding is accepted by the startups from a vulnerable point where they literally hand over the big decision-making to the lenders. 

In course of time, differences of opinion crop up and the enterprise suffers. It is one of the reasons for so many startups losing their way and closing down. With direct lenders, there are no such hassles. The entrepreneurs can focus on completing their dream project without worrying about funds. 

A reliable source of funding can propel faster growth 

It doesn’t take great insight to understand that a business can grow faster and steadier if it is assured of funds whenever required. Direct lenders funding is fast and easy to procure as long as the business shows promise and the borrowers can exercise fiscal prudence with how they utilize the funds. 

This does not mean that the lender will breathe down the shoulders of the borrower and dictate terms. Far from that, they will ensure a highly professional relationship and keep it simple. If the borrowers appreciate this kind of professionalism on the part of the lenders, a healthy relationship can develop between them and this will augur well for the startup. 

It is a lot easier to work with funding from direct lending agencies as they have a very easy and straightforward approval process. The funds are unsecured and are provided on the basis of the lender’s assessment of the borrower’s business. Past credit history isn’t much of a factor unless there have been alarming instances of irregularities. 

 

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