Yesterday, we talked a little about how high interest loans weren’t the worst thing in the world, provided people use those loans for things that are smart, and not just smokes and pixie sticks. I’M ONTO YOU, BIG SUGAR. It was a pretty awesome post, IMO, and you all probably swooned a little after reading it. Well, you’d better have a fainting couch nearby, because your ass is gonna be sprawled out on it by the time you’re done eyeballin’ these words.
So let’s assume you have a killer business idea, something that’s pretty much guaranteed to work. There’s just one problem — you need a few thousand bucks to make the thing happen. You could always save the money, but who has time for that crap? You want your money now, dargbloomit! Apparently you also talk like a stereotypical 1890s sailor. Maybe that’s the reason why nobody will lend you money.
Unless you’ve got some overpriced Canadian house to borrow against, chances are you’re not getting anywhere with the banks. When it comes to… let’s call it creative financing, the banks are probably the last place to go. They’re very happy to lend money secured by real property. They don’t lend squat secured against your dreams.
Let’s look at some real creative financing sources. It will literally be the most fun you’ve ever had in your life.
Is that hyphenated? Screw it. It is now.
Although the peer-to-peer lending industry is barely in its infancy in Canada, American based readers will be very familiar with it. Essentially, borrowers go to the interwebz, and ask regular investors for a loan. Investors are given all sorts of info on the borrower — everything from credit history to the amount of time they’ve been employed — and they choose to fund a small percentage of the requested loan. Once the borrower gets the cash they’re looking for, the loan closes.
Depending on credit history and ability to pay, you’re going to pay an interest rate that ranges from the downright reasonable (5-6%) to rates that credit card companies would normally charge (15-20%). Math would dictate you’d want to pay less, but paying more might be fun if you view it as a challenge.
On second thought, don’t do that.
Oh hey, it’s my favorite thing.
Crowdfunding is even better deal than getting a loan from a bunch of guys on the internet. You get the money, and a bunch of customers at the same time.
Here’s how it works. You say you need $10,000 to make the newest do-hickey. So you go on a crowdfunding site, and give people certain presents if they pledge a certain amount. If you’re making a movie, you promise a copy of the DVD if somebody pledges $20. Somebody who donates $500 might get a whole bunch of movie junk. And so on.
Crowdfunding is great if the thing you’re trying to do is creative in nature. They like creative stuff. You’re probably not going to get anywhere if you start a business that manufacturers poison, no matter how good the profit margins are.
Business Development Bank
Did you know the Government of Canada is in the business of lending money to people just like you and me? Well, mostly you. I have a weird moral opposition against such a thing, even though I’d happily borrow money from my parents.
Sure, it’s a bit of work getting a loan, but rates are reasonable, and they really want borrowers to succeed, so they’re a little nicer than a regular lender would be. You’ve got a better chance of getting the cash if you accompany it with a decent story, so make sure to tug on those heartstrings.
Alberta has a similar program, called Community Futures. It’s not nearly as big as the federal equivalent, but it exists, and could be an option for borrowers in the province.
And that’s about it. Back to your regularly scheduled programming tomorrow.