You’re ready to start your small business. You’ve got a great idea, you’ve researched your industry, and you feel like it’s finally time to look for financing. Figuring out how to fund your dream is one of the most difficult parts of being a small business owner, but luckily there are plenty of options. Here are some financing options beyond a traditional bank loan that you may want to consider.
Use some savings
If you’re starting your own business, hopefully you have saved up some money. Using your own savings is the simplest way to finance your company, because it doesn’t put you in a position to have to pay back any lenders or investors. This comes with risks, however, because if your business fails you won’t have any money to fall back on. But if you have enough savings to put some into your business without using everything, this could be a good choice for you.
Look for an angel investor
Angel investors are entrepreneurs who will invest in startups and small businesses early-on in exchange for a percentage of the company. To attract angel investors, you’ll need a great elevator pitch and a fantastic website that clearly explains the mission of your company. Angel investors are looking to see market assessments and a clear marketing plan, and having a strong, engaging website is a big part of that. Consider working with video animation companies that can create a custom, engaging video for your website that illustrates your vision and why investors should choose to work with you. This shows that you have a clear idea of your goals and you’re serious about getting your business off the ground.
Consider factoring advances
With this method, service providers will give you the money for your invoices, which you will then give back when your clients have paid the bill. This can keep your small business afloat while you wait to receive your first payments from your clients. This is a good choice if you’re struggling with your credit and having problems procuring a traditional loan. It’s also a smart choice if you predict having several large client invoices that may take a while to pay back, depending on the type of service your business will provide.
Use a credit card….carefully
If you have a large line of credit you can put some of your startup costs on a credit card, but keep in mind this is incredibly risky. If you slack on making regular payments you could quickly find yourself in a tremendous amount of debt that could cripple your business and personal finances. This is only a good idea if you are an extremely responsible person and you’re confident you can make payments on time. If you decide to go this route, consider applying for a business credit card, which can help you separate your business finances from your personal and they often come with perks and cash back rewards. Be sure to do extensive research to determine which card is right for you and your goals, since each company will offer different rates and benefits.
Crowdsourcing is a new form of financing that has becoming increasingly common the past few years. To crowdsource, you set up a profile on a site like Kickstarter and set a goal for how much money you are trying to raise. You then reach out to friends, family and your social media communities asking them to donate money to help you reach your goal. This isn’t a long-term solution, but it’s a way to get started. Keep in mind that you should offer something in return for donations, maybe a small sample of your product or a discount.
Use the SBA Microloan Program
The U.S. Small Business Administration Microloan Program offers loans of up to $50,000 for some small businesses. While they don’t give the loans directly, they use intermediaries who may also provide you with some management assistance. Sometimes, these intermediaries may require you to go through some sort of training in order to receive the loan, which may be helpful if you’re just starting out. This is a great option if you are a true business beginner who needs financing and has a lot to learn.
The key with financing is to know your industry and be responsible. Some financing options are riskier than others, and above all else you want to make sure that you choose the one that is least likely to land you in debt.