So You Need to Fund Your Small Business
Even in the current economic downturn, there are plenty of ways to find funding for your small business. These methods range from traditional business loans to the emerging trend of internet crowdsourcing. Any one of these tactics can provide you with capital, but you want to be sure you pursue many different levels of fundraising to ensure you acquire enough startup capital to make your business a success.
On the Internet
Finding funding on the internet is a very recent trend that has the potential to provide your business with all the small business capital it needs – although with the internet, there are no guarantees. “Crowdfunding” is the term for using an online platform to request funds from not only your family and friends, but the entire internet community.
- There are a number of different online platforms available to make your pitch from. Research your options to compare their success rates and how much of a cut they may take from what you earn.
- When making your pitch, be sure to tell your business’s story in a way that is engaging and interesting and makes people want to invest in you. Be sure to answer the questions: Why should they invest in you? What can their money help you do? How will it fill a gap in your funding?
At the Bank
Traditional small business loans are still a popular go-to option for new startups. Be aware that small lending at banks is currently the lowest it’s been in 12 years, that according to Huffington Post. Just as you need to convince the internet to crowdsource your funding, you need to convince your bank that your new business is a good credit risk.
- There are many prerequisites for bank loans, but the most important one is your business plan. You need to show the bank that you have a plan to make money, that your business is viable, and that you’ll be able to pay back the loan.
- Your assets, both personal and business, act as a guarantee to the bank that you can repay your loan even if your business fails. Be sure to list all personal and business property, as well as investments, retirement funds, and trusts.
- Order a copy of your credit report and check it for errors regularly. Keep your credit score consistently average or above average. You may need at least 6 months of lead time to make these changes to your credit, so start early.
In the Store
Purchasing the necessary property, basic office furniture, and supplies all up front can be a big strain on your finances early in your business’s life. However, it’s difficult to get your business running at all if it doesn’t have those necessities. Make your initial funding gains go farther by utilizing your leasing options.
- Consider renting office space, or taking advantage of equipment leasing. Renting or leasing these necessities can serve as a stopgap measure between starting your business and generating enough cash flow to make purchases.
- Leasing instead of buying spreads out the cost of these items over time. The convenience of leasing is offset by the greater expense over time, so consider it only a temporary solution. Once your business starts to grow, save money in the long term by purchasing new space and equipment.
Your startup needs to acquire a certain amount of funding before it can get off the ground. Look into leasing options to reduce the up-front costs of your new business. Explore a variety of funding sources – both traditional and innovative – to fill gaps in your capital and bring your new business to life.
Photo credit: nearshoreamericas.com
Megan Webb-Morgan is a web content writer for www.Resourcenation.com. She writes about small business, focusing on topics such as small business loans.