An angel investor or angel is an affluent individual willing to invest in a company at its
earlier stages in exchange for an ownership stake, often in the form of
preferred stock or convertible debt. Whether you decide to seek an angel
investment depends on your personal management style and the long-term
plans for your company. Unlike a bank loan or other types of debt
financing, equity capital gives someone else an ownership interest in your company.
Community Development Financial Institutions (CDFI)
A certified Community Development Financial Institution (CDFI) is a
specialized financial institution that works in market niches that are
underserved by traditional financial institutions. CDFIs provide a
unique range of financial products and services in economically
distressed target markets, such as mortgage financing for low-income and
first-time homebuyers and not-for-profit developers, flexible
underwriting and risk capital for needed community facilities, and
technical assistance, commercial loans and investments to small start-up
or expanding businesses in low-income areas. CDFIs include regulated
institutions such as community development banks and credit unions, and
non-regulated institutions such as loan and venture capital funds.
Crowdfunding describes the collective effort of individuals who network and pool their money, usually via the internet to support efforts initiated by other people or organizations. Crowdfunding has its origins in the concept of crowdsourcing,
which is the broader concept of an individual reaching a goal by
receiving and leveraging small contributions from many parties.
Crowdfunding is the application of this concept to the collection of
funds through small contributions from many parties in order to finance a
particular project or venture.
Invoice Financing (factoring)
Factoring is a financial transaction in which a business sells its invoices to a third party at a discount. A business will sometimes sells its invoices to meet its cash needs. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. Factoring is not a loan, it is simply selling outstanding invoices for cash.
Micro loans are small business loans typically under $50,000. Micro loans are generally used for start-up cash but are sometimes given to newly launched small businesses for working capital. Micro loans can be used for many purposes including the purchase of equipment, inventory, machinery, fixtures, furniture, supplies, and even to purchase another business.
Each lender will have their own requirements for repayment of a micro loan. Interest rates and collateral requirements vary considerably between lenders but almost all require a personal guarantee by at least one of the business' owners.
Peer to Peer Lending
Peer-to-peer lending is the practice of lending money to unrelated individuals, or "peers", without going through a traditional financial intermediary such as a bank or other traditional financial institution. This lending takes place online on peer-to-peer lending companies' websites using various different lending platforms and credit checking tools.
Venture Capitalists focus on companies developing significant
innovations - be it a new piece of software, a life-saving cancer drug,
or a new model for consumer sales. Unless the company is poised for
significant growth, a VC won't invest. Making investments at the
earliest stages of a company's development, often before a product or
service is more than just an idea, involves significant entrepreneurial
risk which severely limits capital sources for such companies. Yet,
venture capitalists assume this risk alongside the company founders by
providing capital in exchange for an equity stake in the company.