Looking for capital for your business? Don't bet on just one horse
Looking for capital for your business? Don't bet on just one horse
April 2023 – Are you looking for money for your (start-up) business? Then it is good to know that a loan from the bank is not your only option. Diversify your funding so that you have a strong foundation to build on.
'Stack financing' is a form of financing where you do not count on one lender, but put your eggs in different baskets. In other words, you do not knock on the door of one financial institution, but of several lenders and investors.
A smart capital mix
The advantage of stacked financing is that it spreads the risk and inspires confidence among investors. As the amount involved is smaller, the risk is also lower for them, so they will be more easily inclined to come up with money on more favourable terms.
Alternatives to bank loans are also simply a necessity today. Banks are a lot more reluctant than before to finance large sums to start-ups. Moreover, a bank loan comes with a guarantee. If you can no longer pay the fixed monthly amount, you lose your property. This is not the case with alternative sources of financing. There, there is usually no guarantee. They come with a higher price tag in the form of higher interest, high dividend payments or shares.
Alternatives to a bank loan
Which alternatives to banking are appropriate for your business depends on your financial needs and capabilities. We distinguish among others:
Family
For large sums, it is better not to turn to friendly lenders, but for small amounts, it is possible. In fact, the government created several instruments to make this possible.
The "win-win loan" makes it possible for individuals to lend up to 75,000 euros to Flemish SMEs and deduct part of it in their tax returns. And during the corona crisis, the 'friends' share' was launched whereby you can invest in the capital of an SME at roughly the same conditions and thus become a part-owner. Moreover, there are also opportunities in Brussels (with Proxi you can borrow up to 50,000 per project, with a maximum of 200,000) and in Wallonia (with Coup de pouce you can borrow up to 100,000 euros).
Investors
As an entrepreneur, you can apply for money from investors. Mind you, you will have to come up with strong arguments to convince them. Have you built up a nice customer portfolio or a strong concept? Then the cards are in your favour.
Also knock on the doors of other companies. Large companies are often looking for small companies to buy in (corporate venturing).
Crowdfunding
Crowdfunding is not just for charity, businesses can also raise capital easily and quickly from investors and private investors this way.
Government
The government has become one of the most popular lenders to businesses in recent years. Note, however, that each grant comes with specific conditions attached. So you need to plough through a mountain of paperwork for it.
Seek advice from your accountant
Looking for a source of funding for your SME? Knock on your accountant's door for tailored advice.