If you’re looking for simple financing options for your small business, keep reading for tips and ways to fund your entrepreneurial dreams.
Funding for any small business is challenging. Though, it can be daunting to ask for money when you know you’ll be running the entire operation from your home – I’m here to tell you to get that thinking out of your head!
If you’re not spending money on office rent or paying a large number of employees, there’ll be less money to borrow, and, ultimately, less money to pay back.
But before we jump into ways to fund your business, here are some helpful tips to help investors feel more confident investing in your small business.
Put a Lot of Thought Into Your Business Plan
Just because you’re not in a formal office doesn’t mean you get to skip writing a business plan. Investors will always feel more comfortable giving money to a strong, well thought out business plan.
A reasonable investor shouldn’t care about the type of office you’re in, they should be concerned with your short-term and long-term goals, and how you plan on meeting those goals.
Need a business plan template? Grab this one here. Fill it out thoroughly, and give it the time it deserves. Not only is a good business plan a great tool for gaining investors, but it’s also an excellent tool for keeping you as the business owner on track and striving for your starting goals.
Incorporate Your Business
File your at-home business. Not only do investors feel comfortable loaning their money to an incorporated business, but customers also feel comfortable giving their money to an incorporated business.
When you incorporate, you also have the option of gaining support via shareholders and the ability to sell shares down the road. You can also raise capital and offer stock options to your employees. Not to mention, down the road, incorporating also saves your business when it comes to taxes. Just be sure to weigh your options when it comes to choosing the right entity for you and your at-home business. Some popular options:
- B Corp
- S Corp
Consider your entity type when drafting your business plan, and definitely communicate your filing intentions to your potential investors.
7 Financing Options For Your Small Business
Whether it’s personal or for business, taking out a loan requires doing more due diligence than many entrepreneurs might think. Before you rush to take one out, do your research to determine which type of loan would be the best fit for your needs.
Check with the U.S. Small Business Administration to find lenders that offer loans to fit your business. With comparable rates and fees, counseling support, and unique benefits, you may find that opting for an SBA-guaranteed loan is a better fit for your business than a private one.
If not a loan, where else can you get financing? Other options include using credit cards (just be sure to pay off the balance in full each month!) and borrowing money set aside in a retirement fund.
When a startup receives a grant, they do not have to pay the money back — the best kind of funding when you’re in a financial bind! However, your small business isn’t the only one applying either. Grants are in high demand by other entrepreneurs in need of financial assistance.
When seeking out a grant, take into consideration what makes your business unique. From your location to your industry and even your background as an entrepreneur, you may be eligible for more support than you realize! Other areas to keep in mind include general eligibility guidelines when applying, how reputable the funding source is, and if you are approved for a grant, whether or not the money will arrive in time to cover your needs.
3. Venture Capitalists
If your startup is specialized, like an app, you may want to seek financing from venture capitalists. They won’t need to be paid in return for backing your business, but they will require shares in the company to give them an active role in the company. If you do have a venture capitalist interested in your business, make sure that the market you’re in is large enough for strong ROI and that your idea is a solid one.
4. Angel Investors
Anyone with an existing sum of wealth can act as an angel investor for a startup, especially those that are passionate about their businesses and have a strong understanding of how they will succeed. Unlike venture capitalists, angel investors can’t invest millions, but at the bare minimum, they can start you off with $25,000 along with required equity in the business.
Crowdfunding has grown enormously in the past few years. Crowdfunding is essentially the funding of a venture or project through raising money from a large number of people over the internet. Thanks to sites like Kick Starter and Go Fund Me, just about anyone can gain a platform for raising money.
Some crowdfunding users like to offer their investors prizes or incentives to donate. This could be anything from coupons to your new business to a sample of your products or services.
Just remember that once you make your crowdfunding page, it’s up to you to get the word out. Post the link to all your social pages, and encourage your friends and family to share. With an incentive program and the power of social sharing, funding your small business is entirely possible through crowdfunding.
This is the least glamorous option for startups searching for capital because you are your own source. Bootstrapping means cutting back on expenses across the board and working without the help of investors or any outside money. I would know a thing or two about how this works because this was the route I chose when I bought my own business. Was it hard and I mean really, really hard to do? Yes. Was it impossible? No. If you are determined to see it through and not give up, then bootstrapping shows entrepreneurs what they’re capable of when it comes to their business.
7. Ask for Favors Where You Can
Unfortunately, as every small business owner knows, starting a business means asking for favors where you can. That means reaching out to friends, family, and old school or work colleagues for investments. Part of owning a business is selling yourself and continually putting yourself out there, so practice your elevator pitch. If you believe in your vision and your small business in general, pitching won’t feel so painful. It’s an investment, not a handout. Though, if you want to involve as few personal investors as possible, find the right small business-friendly bank to take a loan out from.
There you have it, seven simple and easy financing options for your small business. How did you fund your business? Drop us a note below, we’d love to hear from you!