Alternative Funding For Small Business & Startups

While entrepreneurship has its risks, so does direct employment. Many with steady careers go about their business feeling secure not knowing that their jobs are at risk everyday. Managing and flexing costs with the health of any business is a fundamental of good leadership. Employees being in the dark about how this may impact them personally is a risk. In fact, the lack of visibility into key decision-making may present more risk than entering the gig economy or starting and running your own business. I have been fortunate and benefited by working for others as well as myself.

There are approximately 48 million independent workers today and growing at 3 plus percent annually. With over 27 million small business in the United States there is still plenty of room for growth given the re-composition of traditional markets. Digital offer delivery and frameworks such as franchising have reduced traditional hurdle rates and thus risk. However, all too often the access to capital hasn’t kept pace with the aspiring entrepreneur’s ideas. While large financial institutions and their investors have benefited from consolidation, shrinking branch footprints and generally improved efficiency ratios, it has all too often left startups and small business with fewer liquidity options.

This is one of the factors leading to the growth and emergence of Fintechs and marketplace lenders. Beyond filling a consumer need, many of these alternative lenders have partnered with traditional banks, providing them with more effective origination platforms and CRA credits in the process. As banks pulled back their branch footprints many small businesses still needed the interaction with physical locations.

SBA loans have been a logical source of funding for startups. The problem is, that a bank  may only advance 70 to 80 percent for each dollar needed to borrow. The effect is that the entrepreneur must come up with equity to fund the difference. Congress came up with a solution in the ROBs plan. It enables an individual to utilize retirement funds penalty-free and tax-deferred to start, buy or invest in an existing business. The funds infused is treated as equity and thus can be leveraged or utilized as a credit enhancement.

Pango Financial provides such a offering through its DreamSpark plan. It is compliant, 24/7 online and provides free incorporation and other services bundled in with the service. If interested in more detail visit Pango Financial.

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