Thursday, September 5, 2019
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During a day in the life of an investor, they try to fund and support as many companies in the hour of need, but the truth about niche businesses are not as lucrative for investors as mainstream ones – at least not in the beginning.
Since a niche business only caters to a specific area within a business segment, its clientele is rather small but highly dedicated. These businesses, like any other business, may find themselves in need of money due to a decrease in cash flows owing to seasonal trends or diminishing demand. Niche Funding is available to these entities so that they may take care of their temporary financial woes.
The Requirement of Niche Funding
Being the owner of a niche business, you may, at some point in time, realize that you need external funds to keep yourself afloat for the time being.
You are hopeful that sales will increase in the future, and you will become profitable once again; however, if you don’t do something about your dwindling reserves, you may go down soon. In such a situation, obtaining a niche finding will become imperative.
How to get Niche Funding
Now and then, all businesses require loans/funding from lenders, so there is nothing wrong about applying for a niche loan. Lots of companies experience cash flow issues for which they usually obtain outside financing. There are two primary sources where niche funding gets along well, the first is alternative lenders, and the second is crowdfunding. Let's discuss both at length.
You must understand that there are many types of loans, and niche loans are the most undesirable from the perspective of commercial banks and Financial Institutions.
Commercial banks approve less than 23% of the applications received by them from small companies, so if your niche business is small in size, there are lesser chances for getting approval.
It calls for seeking out other alternative sources of funding rather than the usual banks.
Banks and financial institutions have very strict SOPs. When seeking a loan from these entities, you will be required to fill their forms and submit scores of documents.
Another problem with banks is that they approve loans for specific purposes. For example, if you have obtained a loan for renovating your business premises, the bank will expect you to do precisely that with their money.
Money from alternative sources does not come with such conditions. You can use it for covering gaps in your cash flows or managing your day-to-day operations. It is entirely up to you.
Non-banking lenders, on the other hand, do not have any such requirements. You can apply with them for niche funding online through their websites.
It takes very little time to fill up their online application forms. They usually seek more than 24 hours to let you know if your application has been approved or rejected.
If your application is approved, the disbursal of the loan amount will be within the next few working days. In most cases the money is directly deposited into the account you have mentioned in your application form.
Another thing that goes on the favor of non-banking lenders is that they do not need collateral from you before disbursing the loan, which is a mandatory requirement with commercial banks. In many cases, the credit rating may not also pose a problem. Obtaining niche funding from non-banking entities is much more relaxed and feasible.
Niche Funding through Crowdfunding involves individuals, organizations or entities funding a niche business with the help of small donations from several people
While Crowdfunding is a rather old idea, the practice of niche funding through this phenomenon is a novel concept and has only recently gained traction.
Internet is the primary driver of crowdfunding, where the majority of these campaigns are initiated and run.
To obtain niche finding through this concept, you must have uninterrupted access to the internet, and the basic knowledge of the web.
You must also be aware of the rules and regulations of the particular website through which you are seeking to launch your niche funding campaign. There are a few websites that restrict specifics businesses.
Contrary to widespread belief, obtaining crowdfunding is not easy at all. It needs quite a lot of effort to establish and presenting a niche business project that will catch the interest of many investors.
With the increasing popularity of niche funding through this method, the investors have become shrewder and thus, only invest in projects that they deem incredibly viable.
It is a challenge in itself to gain widespread support for your niche business from a diverse group of people.
However, if you take care of the following points, you can obtain niche funding for your business without encountering any significant hurdles.
- Design and implement a strategy for funding that is informative, effective, and cost-effective.
- Send the right message to prospective investors.
- Explain why you need the money. How you plan to use it, and how it will increase profitability.
Crowdfunding challenges for niche businesses are unique because they are specific to your entity. You will have to find your ways of convincing investors, respond to their queries, and render it feasible for them in all aspects.
Niche funding has become popular only recently until investors have only just begun to understand that there is vast potential in a niche business that has remained untapped until now.
It has opened opportunities for entrepreneurs who are carrying out such businesses to find funding and expand their businesses.
With time, commercial banks and mainstream financial institutions will also realize that niche funding is here to stay. The phenomenon will continue to grow compelling more people, who have been reluctant due to lack of funding, to enter niche markets.