Once you’ve nailed down an awesome business idea, the next item on your “to-do list” should be exploring funding options. Entrepreneurship provides you with autonomy and flexibility and allows you to flex your creative muscles. However, the business finance part of your strategy can feel a little stressful. In a perfect world, you’d have enough money stashed away in your bank account to fund the entire business yourself, but nine out of ten times, that’s not a possibility. This doesn’t mean that your genius business idea has to go to waste. Instead, it’s time to seek assistance from others.
When most people think about startup funding, their mind immediately goes to securing small business loans from a bank or lender. However, there are several other alternative funding options that should be explored before running to the nearest bank.
Source out an angel investor.
Not only do angel investors have a cool name, but they can also be incredibly helpful in getting your small business off the ground. An angel investor is a private investor or lender who can offer the money you’re seeking in exchange for a negotiable stake in your company.
It’s important to really think through this trade-off, as working with an angel investor will provide you with the funding you need. However, you do lose some control over your company. These types of investors can often be found through networking, and to capture their attention, you’ll need to create a presentation that outlines your business plan and growth projection.
Crowdfunding is a great option for small business owners seeking some cash flow to grow or improve their company. This type of startup funding raises small amounts of money from many, many people, hopefully adding up to a sum that’s enough to support your business goals. Crowdfunding is commonly done through platforms like GoFundMe or Kickstarter.
To create a crowdfunding campaign that catches the eye of donors and lenders, you’ll want to make sure it’s promoted heavily on social media with creative and unique marketing materials. If you want to go above and beyond, you can even host an event to promote the crowdfunding campaign.
Pitch your small business concept to a venture capitalist.
Venture capitalists, otherwise known as private investors, offer financing options for small businesses and startups. Like angel investors, venture capitalists will receive a stake in the company’s equity, which is why they are more likely to work with small business owners who are already ready to launch their service or product.
If you’ve ever seen an episode of Dragons’ Den or Shark Tank, the business moguls who provide the entrepreneurs with funding after their pitch are venture capitalists.
Explore government loans and grants.
While this isn’t always the case, you may be able to receive free money from the government to funnel into your business. Looking into potential government grants and incentives before exploring other financing options is a wise idea. Often, the government offers grants to small business owners within certain industries (like science, for example) or female-owned startups.
Apply for a business loan.
If you’d prefer a more straightforward and traditional way of securing funding for your business, consider applying for a loan. When applying for a bank loan, you’ll need your credit history and a comprehensive business plan to show the credit union, bank, or private lender. Within this business plan, you should have your mission statement, information on products and services, growth projections, and finance numbers. With a traditional business loan, you’ll have to repay it in portions over a period of time. Unfortunately, it’s not just free money!
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