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Fundraising

7 Ways To Fund For Your Small Business

7 Ways To Fund For Your Small Business
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In the last decade or so, the metrics to measure a small business seems to have changed. Most of the talk in the startup space seems to revolve around two factors – the amount of money you’ve raised, and your employee count. According to me, both these factors are not the right metrics to measure the success of a startup.

Some successful entrepreneurs recommend that a startup should be bootstrapped in its first few years before the founders go out to the market to raise capital from angel investors.

Here are some options to explore before you solicit an angel or a venture capitalist.

Crowdfunding

A lot of crowdfunding sites seem to have sprouted up in the last decade. The government too is waking up to the fact that crowdfunding has become big enough for it to be regulated.

Most entrepreneurs and creative people create a campaign on a crowdfunding website and promote the campaign to friends and family. They are usually the early contributors to your campaign. Your family and friends can promote the campaign to their friends, and there are possibilities for the campaign to go viral.

You can also create an event on social media and invite locals to support your new venture. It is important to provide information that will support your new idea and show the local community how it will be an asset to the local area.

A crowdfunding campaign is more about the cause than about you. So stay focused on the cause and not you.

Savings

Some small business owners liquidate personal assets and sell-off personal property to fund their business. It is the belief that physical things are just things and making a dream come true is more important. Things can be replaced later, when there are funds to purchase them again.

Government Grants and Loans

A lot of governments around the world facilitate loans for small businesses. Governments have realized that small businesses create jobs, and they are important for the local economy. Unfortunately, most entrepreneurs are not even aware of this. Check with your local bank or research around the internet to figure out government guaranteed small business loans in your industry.

Besides loans, governments also give grants to small businesses. This can be a lengthy process at times, and it might be prudent to work with a grant specialist to assist you through the application process.

Personal Loans

Personal loans are sometimes easier to get than small business loans if you have good credit. It is a good to ensure that you have good enough credit and the necessary documents. But this can be very risky, and interest rates can be a bit high.

Sometimes, banks even give out a loan to the business based on a personal guarantee from the business owner. It’s important to be careful when you personally guarantee a loan.

Find a Partner with Money

Sometimes, you may find people with money who would like to run the business along with you. Partners may have equal say in the happenings of the business depending on how you structure the deal, but are also equally financially responsible.

One of the benefits here is that you have somebody who brings in not just money but also expertise.

However, if you and your partner are not on the same page, then it could be a problem.  Choose your partner(s) wisely. Don’t just work with someone just because he is bringing in money.

Customers

Yes, you heard that right. If your business is not very capital intensive, you can start selling your services with a business card, and start taking orders.

A lot of businesses don’t get venture capital or angel investors early in the game. They bootstrap and sometimes get their early customers and operating cash flows to fund their business.  

If you are using this approach, it’s important to sharpen your money management skills and find a friend or mentor who can help you manage your finances.

Factoring

Factoring should be the last option as it can cause substantial amount of immediate debt. Factoring is most commonly considered by those with limited funding, and are strapped for cash. Here the business sells its receivables at a discount to obtain immediate cash. This can be dangerous and should rarely be used.

Conclusion

Get creative when you need to fund your business. Consider holding networking events in your community, asking for material donations, and getting media exposure. A lot of people have unused equipment, items, furniture, even space that they may want to lend. Cash has rarely stopped a focused entrepreneur from achieving his dream.

Edition: December 2016

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