How to Get Funding for a Small Business
Financing your small business in today’s ever-changing economic landscape can require a bit of creative ingenuity. You may need to think a little outside of the box to financially get your small business up off the ground and running. Traditionally, small businesses have been the backbone for recovery in a floundering economic climate when it comes to hiring. However, capital is essential to hiring, and capital can be a tough egg to crack.
In all honesty, the majority of small business ventures are rarely funded from a single source, or even from a couple of sources. In fact, most small business owners piece together various sources of funding over a long period of time. You will likely find that no source of funding is any easier to come by than another. It largely depends upon various factors, such as business projections, business models, and your ability to sell your ideas to potential partners willing to help finance your venture. Whether you are an existing business in search of capital to finance growth, or you are a small start-up in search of seed capital to get your business up and going, you must remain flexible, positive, and vigilant.
Regardless of the reason you are in need of capital to finance your small business, you will need to approach the matter from various angles and put on your creative thinking cap. Funding for your business will almost certainly have to be derived from a number of various sources, so let’s get started with some ideas!
Friends and Family
While this may seem like a no-brainer to some, many prefer not to approach friends and family to help fund a business. Your close friends and family may be your first thought for assistance, and there is certainly nothing wrong with this approach. When done correctly, it can be a win-win situation for everyone involved. However, if not handled carefully and professionally, it could end up costing you some of your closest relationships, and no business is worth losing a good friend or hurting a loved one. Those closest to you are the most likely ones to support you and believe in your capabilities. However, if the business should fail, you risk ostracizing these supporters and risking your closest confidants. In an effort to avoid this, you should properly structure funding from family and friends as a one-year, high-interest loan. Borrow just what you need to get your business going and acquire sound legal advice. These measures can help you salvage your relationships if the business should fall through or go sour.
Pull up Your Bootstraps
Many small business owners and self-employed entrepreneurs have realized that a large part of their funding will need to be self-funded. This is also commonly known as “bootstrapping.” Your business or other entrepreneurial projects will likely need to be largely self-funded until more formal methods become a realistic opportunity. You can self-fund in a number of ways, including zero-interest credit cards, savings accounts, and other financial assets. Investing your own money in your business venture shouldn’t be a problem if you are confident in your own vision. In turn, potential investors will be more comfortable investing in you knowing you have pulled up your bootstraps and put your own finances to work before asking others for funding.
Small Business Loans
Yes, getting approved for a small business loan can be tough, but not impossible! Do some diligent research and find a bank willing to take a chance on your small business. While financial institutions are more stringent in today’s economy about handing out loans than they used to be, they will grant loans to serious entrepreneurs and small business owners who have an efficient business plan, steady profit projections, and other funding sources. It also helps immensely if they see you have invested your own money in your business. This lets them know you are serious about succeeding and willing to place your own resources on the line. Don’t be afraid of filing for a small business loan. The worst they can say is no. However, they might just say yes. Give it a shot!
Angel investors have become a popular method for funding small businesses and start-ups. But what exactly is an angel investor? An angel investor is an individual willing to provide funding for a start-up or small business in exchange for shares or ownership stakes in the company. However, in many instances, these investors may have no actual involvement in the company. Angel investors do intend to get their money back someday, with appreciation. In an effort to improve the odds of investing in a successful endeavor that will make them a hefty profit, angel investors consider the following things when evaluating a business:
Viability and efficiency of a business plan
Track record and experience of founders
Projected growth of the business
The value, usability, and need of the product or service
An exit strategy
Before you decide to go the route of angel investors, keep these things in mind and be prepared. If you think your business might be a good fit for angel investors, you might wonder where to find them. Some of the most common angel investments happen through accountants, lawyers, venture capitalist, and crowd-sourcing sites. There are also a number of regional angel networks and online platforms available. Do your research and give it a shot. You might just land an angel of a deal!
Whatever path you choose to take, chances are you will need to incorporate all or many of these methods to gain the capital you need for your business to grow and thrive. When the rubber meets the road, the fact is you have a business to run. None of these funding methods matter if your business is not given your full attention so that it might grow and be successful. Whatever funding methods you use, make sure they allow you the time you need to properly maintain and operate your business.