What are Your Options for Funding?
Let’s talk money. Whether you’re looking to start up a new business endeavor or grow the one you already have… You’re going to need two things: a plan for success and funding. If you are starting a business, you begin with completing a business canvas model or a basic business plan. If you are growing a business, you need a well-thought-out plan for how you will accomplish the growth. Starting or expanding a business as a small business owner often requires capital, and as an entrepreneur, you have several financing options to consider.
What are Your Options?
Let’s explore some of the critical sources of funding:
- Community Banks/Regional Banks – In my opinion, this is your first choice. I say that because with this option you can create lasting relationships that will benefit you for years to come with personalized service. The lenders live locally and they want to help the community grow. Many times, they have competitive fees and rates. Community and regional banks do not always have an appetite for start-up businesses, but give them a chance before you count them out! Remember that each bank has its own set of guidelines and its own groups of businesses they like to finance. You might not be their cup of tea! It is not personal.
- SBA Loans – SBA loans are an excellent option for many business owners. Backed by the federal government, they offer flexible terms and reasonable costs for businesses that meet the SBA’s qualification criteria. Some advantages include credit flexibility, extended repayment terms, maximum interest rates, and continued support. Business owners choose not to use the SBA because of the time it takes to get approval and complete the funding process.
- Business Lines of Credit –A business line of credit allows you to access funds up to a predetermined limit as needed. Interest accrues only on the borrowed amount, and you can reuse repaid funds during the draw period. The draw period can range from 1-5 years. Typically, they are a revolving line of credit secured with a business or personal asset!
- Bootstrapping – Bootstrapping is the process where an entrepreneur establishes and grows their company using minimal external funding. Instead of relying on outside investments, bootstrapping involves using personal savings, credit cards, loans from friends and family, and revenue generated from early sales. It allows the business owner to control decisions but may also increase financial strain. Bootstrapping means building a company from the ground up with limited initial resources. This is not for the faint of heart!
- Angel Investors and Venture Capital – External funding options include angel investors and venture capital firms. Angel investors invest their funds in startups, while venture capital firms provide larger sums in exchange for equity. These options often involve pitching your business idea and building relationships with investors. This option is not for everyone. Some businesses that can take advantage of this funding source are technology-based businesses, B2B business models, and healthcare.
- Crowdfunding – This is not a GoFundMe. Platforms like Kickstarter and Indiegogo allow you to raise funds from many people who believe in your project. Crowdfunding can be an effective way to validate your idea and gain early supporters. It is available but not widely used.
- Grants for Small Businesses – I place this last as they are very few and far between. Like Unicorns if you will. They typically are for very specific business types or demographics of business owners. You can still look for them; just don’t bank on getting one!
Long story short…. You have lots of options! You just need to be willing to take the time to figure out what is best for you and your business. You will be told “ No” by funding sources. It is ok! Go to the next one!
Funding Tips
I will leave you with these tips!
- Do not wait until the business has caught on fire to ask for help!
- You can not start your business without putting some of your own $$ into it!
- Be prepared when walking in to talk to your funding partner!
- It takes capital to grow your business!
- If you borrow $ from friends and family, write up a loan agreement and get it paid off as quickly as possible.
Looking for Funding Your Next Great Idea?
Make an appointment to talk to Kelly today! Kelly is one of our business coaches who can break down financials. Entrepreneurs and small business owners are welcome. New ideas are just as in need of funding as up-and-running ideas. She can help you come up with a plan and help you take the next step with your business financials. Let’s put a meeting on the calendar.
