So you’re a small business owner. You have the great idea. You have the well-developed business plan, and you know exactly where you want to go and what you want to do. What’s left to do? Secure financing! Ideas can only get you so far, you need the capital to turn those ideas into reality. There is a myriad of ways to go about financing your small business. Let’s explore your options and see what works best for your business!
The first resource you should seek out is always the closest to home, namely yourself. Your business is your baby and as such is highly personal, so before you consult outside sources, start with yourself. The key here is not to overestimate what you are able to contribute to your business venture. Budget, budget, and budget some more! This cannot be stressed enough! When you do your personal budget, keep in mind any worst case scenarios. Do not take all of your life savings and put it into your business, make sure you have enough to take care of yourself even if the unexpected happens. When you have your budget in hand, contribute what you reasonably can to your business.
Radiating outward, the next logical step is to consult your close friends and family for financing. Though they may or may not be able to contribute very much, most of these people in your life will give you the support you need (though not always financial) when starting your business, and they may just surprise you with how much they are willing to provide financially. Even if they can’t or won’t invest money in your business, these trusted friends and family may provide you with good word of mouth. They may even be able to connect you with potential contacts for investors. You never know! Just remember that when you accept any financing for your business (from anyone even family and friends), you need to set terms. Is it a loan? Is it a donation? Or is it an investment? If it is a loan or investment, you need to determine the stipulations. Always get something in writing! This will protect you, your business and the person giving you the financing.
Now that you have your own capital invested and have contacted the people closest to you, you have a wide variety of options available to you for further financing. The first step you should take is to determine if you and your business qualify for any government grants to finance your business. You can do this by going online to the Small Business Administration (www.sba.gov) and researching the grant options available. If you qualify, apply! Grants do not have to be repaid, do not come with the strings that investors have, and are available for those who qualify.
While business loans are not as readily available as they once were, they are still offered by many banking institutions. Begin the loan process by researching the options available to you. Look at local banks and credit unions, as well as major national banking and financing institutions. Before you apply for any one of these loans or lines of credit, ensure that you thoroughly read all terms and conditions and that you are selecting the best possible option for you and your business! While you can and should begin the initial research process online, when you have narrowed down your options, you should contact a banker via phone or in person to get a better sense of the institution and to address your questions and concerns. Know all of the facts before you take out the loan.
Fundraising websites such as Fundly and GoFundMe are all the rage right now. Crowdfunding sites allow individuals and businesses to set up their own fundraising page on the site and ask friends, family and anyone else to donate funds to their venture. These sites are free to join (fees do apply to the funds raised using the site, but are quite reasonable). If you have a large number of acquaintances or previous business contacts that you did not consult for financing previously, crowdfunding is a great way to reach them! You can send out emails or Facebook posts to these contacts with a link to your crowdfunding page and they can choose to donate or not. This is a no-pressure means to ask for investments in your business venture and can yield great results!
Finally, you can seek out investors or partners who can contribute their own capital. Angel Investors are an option as well. An angel investor is an affluent person who invests in start-up companies. They do this in exchange for a sizeable return on their investments and/or a portion of the business. While these options are great, they do come at a price. Make sure you have a plan set out for yourself before contacting investors. Know how much you are willing to give up in return for the investment. Have a plan in place to demonstrate your preparedness to fulfill the return obligation.
Financing a small business can be a daunting task, and the options are numerous for how to do so. The key concept is to think of it as ripples in a pond. Begin looking for financing in those inner circles and range out from there. Personal investments, friends and family, grants and crowdfunding are the best places to start. From there, seek out other options such as loans and investors (or angel investors). You can find the capital you need for your small business. You just have to know where to look and to weigh your options carefully.1.4k reads