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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Four Ways to Fund Your Small Business Without a Bank Loan
Starting a new business is an exciting time in your life, but it’s also a very expensive time. Start-up costs can add up quickly and aren’t avoidable. So, what happens if you’re looking for ways to fund your small business but don’t want to use the route of a bank loan? Are there other options that can work and provide you with access to the funds you need? The answer is yes, there are actually a number of options that you can explore when it comes to funding your small business.
Venture Capitalists
Sure this may sound like something out of the 80s when business was booming, but the fact is that venture capitalists are always looking to invest in new and exciting start-ups. We often think of venture capitalists in terms of a big huge company, who will only invest in big businesses, but this isn’t the case. There are venture capitalists looking to invest in small companies, who are willing to go the distance and invest what is needed.
Finding a small business lender can be tricky. Therefore compering the best small business loans may come in handy - where small business lenders and owners can meet and put together deals. As you read through you will come to see just how useful it can be.
Crowdfunding
This is a relatively new funding avenue that has really blown up in just a few short years. Crowdfunding involves raising funds through an online platform. You've probably heard of fundraising platforms such as Kickstarter, Fundable, RocketHub, and more. The way it works is that you put out a campaign that explains your business, what you are trying to accomplish, and how much you need to raise (your goal). People can then donate as much as they like. This typically works best for small businesses and non-profits.
Friends and Family
Of course, this has always been a popular route to take, but there are some warnings and cautions with this approach. Borrowing money from family or friends can be a bit of a touchy subject. It's important to consider how this loan would affect your relationships should the business fail and you aren't able to pay back the money. Even if the business succeeds it can still take longer than you anticipated to pay the money back. Would that sit well with your family member or friend?
In the case of borrowing from family and friends it’s always best to take a very professional approach. Draw up a professional lending contract/agreement, that both parties sign. Set up the payment schedule in advance, and discuss the “what if’s” so everyone is aware of the risks and what they will mean.
Form a Partnership
Even though it may seem like a great idea to start a small business up on your own, reality can take over and make it hard to do. A partner may be the answer to your problems, specifically your funding problems. They can bring their own source of funds to the table, which they can invest into the company. Now keep in mind, in order for the partnership to succeed there must be respect for one another, and each partner has to benefit from the arrangement.
Thinking Outside the Box
While obtaining a loan to help your small business is usually the option people are quickest to jump to, it’s not the only one out there. There are a variety of ways you can go about obtaining cash for your business. It really is dependent on how far along your business is, how much money you need, and what kind of repayment terms you’re looking for.
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