Friday, October 30, 2015
A Practical Comparison of Lending OptionsBy Krista Tuomi, Associate Professor, American University Entrepreneurs often explore a range of funding sources to expand and/or finance working capital, including ‘alternative’ ones such as peer-to-peer (P2P) lending and invoice financing. These have recently been enjoying media exposure, sometimes erroneously grouped in the same category as angels. As with my previous blog post on bank loans, this table is supposed to give a rough idea of the advantages and disadvantages of each source. Such information is useful when advising a firm, or considering investing in one which has already tapped this pool of money (and probably is paying dearly for it). What should stand out for angels and entrepreneurs is that debt financing for very early-stage companies, when available at all, is extremely expensive. One more consideration are possible fees or charges that are often very difficult to calculate and may include penalties for early repayment of notes.
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