A couple of years ago, I wrote a post on how to fund your work-at-home business with tips for gaining the necessary money. I like to think of that post as a basic introduction for what entrepreneurs should do if they’re seeking capital. You’ll want to draft up a business plan that outlines your financial projections and financing request, reach out to family and friends for assistance, look into crowdfunding, and incorporate your business to give it further credibility and make anyone providing financing feel comfortable about doing it.
However, what happens if you have done all of this and it simply isn’t enough? What if your family and friends can’t afford to help out or crowdfunding turns out to be less successful than you anticipated? It’s time to step up your efforts by exploring your financing options. From angel investments to taking out a loan, here’s a look at five financing options available to entrepreneurs in need of extra capital.
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 in 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 ‘treps 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.
I’ve saved the best for last — right? 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.
There you have it, five 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!
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Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter.