Small Business funding isn’t a one-size-fits-all scenario. First, you must determine your funding needs. Most entrepreneurs can imagine a brick & mortar spot in a trendy part of the city with their business name shining bright overhead but if you’re just starting, it’s best to keep your overhead costs low and test to see if the interest in your idea or product has the growth potential. If you’re beyond that point and the product or service is a hit beyond family and friends, start mapping out next-level costs. According to Business News Daily, the most common startup expenses include:
- Web hosting and other website costs
- Rental space for an office
- Office furniture
- Labor
- Basic supplies
- Basic technology
- Insurance, license, or permit fees
- Advertising or promotions
- Business plan costs
Just Starting Out?
Typically, you, the business owner, are the first investor. Putting up your own money shows you believe in your idea and are willing to risk a loss to get it going. This is also a selling point for future investors.
If you’ve reached out to family and friends and they are willing investors, work out a clear agreement. Do they want to be paid back? With interest? Do they want equity in your business? Think it through, make your plan clear amongst all concerned parties, and stick with your agreement.
Establish a Plan
You have to have more than a dream to impress an investor of any kind. You must have a well-thought-out and researched business plan at the ready. Any funding opportunity representative is going to want to see your business plan and projections for the future. They will want to see how you would use funds and how/when you will pay it back. Investors will ask to see financials. Be sure to have your books clean and up-to-date. This way you’re prepared when asked for historical data.
Build a Reliable Team
Small business owners must establish relationships with three people – a banker, a CPA, and an attorney. Any time you need funding, your bank will be your first stop and an established relationship will save you valuable time. Before you commit to any funding, you should always consult with your CPA and business attorney.
Find Your Fit
Although not impossible, getting a loan from a bank for a small business can be a challenge. There are alternatives to these traditional methods. To find the right fit, you’ll need to do a bit of homework. Business News Daily offers up in detail a list of the top financing options for startups and small businesses without a traditional bank. Here’s a quick look at a few:
- Community Development Finance Institutions look to provide responsible borrowers with financing for their startups under reasonable terms.
- Venture Capitalists are usually a company of private equity investors that see long-term growth potential in your business and take part ownership in exchange for capital.
- Partner Financing is when a partner in your industry funds the business and in return gets special access to your product, services, distribution rights, etc.
- Angel Investors are wealthy individuals or groups who invest in new businesses in exchange for equity ownership.
- Invoice financing is a way for businesses to borrow money against the amounts due from customers.
- Crowdfunding can help fund your business with contributions from multiple people who believe in your idea/business. Good for a financial boost.
- Grants offer money for a business startup or project, usually by government agencies, nonprofits, or certain businesses that don’t need to be repaid.
Whether you take a traditional approach or an alternative, be sure to do your research. In addition, contact your trusted team of advisors (bank, CPA, attorney) to be certain you understand all the details regarding any loan, grant, or financing option you choose. Best of luck to you and your new business!
