The financial crisis has hammered many industries, but it has sparked strong growth for Internet sites where small businesses can find investors and lenders online.
"Since September, we have seen a considerable rise in traffic to our site," says Robert Bertsch, president of RaiseCapital.com, which matches small businesses with potential investors.
“I believe in the value of networking. It's the life of your business.”
"Because traditional avenues for businesses to find investors are so broken down, more people are looking at us as an alternative. And on the other side, investors who have seen their capital diminish [in financial markets] are looking for something close to home where they can kick the tires."
Remember that entrepreneurs without a solid business plan are no more likely to receive money online than off. Also be aware that many unsavory characters lurk around the Internet, trying to separate users from their wallets, business ideas, etc.
But the overall picture is rosy. The way it works on RaiseCapital and other sites is that small businesses present a description of themselves and what kind of investment or loan they seek. Then investors or lenders who read the description can contact the business via e-mail. On some sites, small businesses themselves can initiate contact with investors or lenders.
Some sites, including RaiseCapital, allow no-frill listings by businesses for free. But most service providers charge a monthly fee of $10 to $40 for companies that want a prominent listing or the capability to contact potential investors.
More willing to take riskJustin Fontenot, president of Symmetric Healthcare Staffing, a temporary nurse agency in Abbeville, La., thanks an Internet loan for getting his business off the ground.
He founded his company in 2006, but couldn't begin operating without a loan. Fontenot, a former nurse himself, needed that money to pay his nurses until his clients paid their bills to him.
"We had tried to find banks, but they considered it too big a risk, especially since we had no revenue yet," Fontenot says. "That wasn't a feasible option."
Through a Google search he found GoBigNetwork.com and posted a brief description of his business along with a loan request. "We just gave very basic information, because we didn't think it would get us anywhere," Fontenot says.
Within a week he was contacted by someone at a funding company. "We'd never even considered funding companies before," he says.
But since October 2007, that company and another to which Fontenot's initial contact migrated have provided him with several million dollars at an average interest rate of 3.4 percent.
As a result, Symmetric is producing annual revenue of $2.1 million and has a roster of 100 nurses. Fontenot believes his choice of industry probably played a role in the ease of finding a loan online.
"Because the need is so great for medical staffing companies, I'm assuming people are more willing to take a risk," he says. "I would assume someone opening a retail store now wouldn't have much luck" finding a loan.