Today’s small businesses exist in a new economic landscape that forces creativity and out-of-the-box thinking when it comes to financing. Small businesses have traditionally been the key driver for economic recovery when it comes to hiring, but hiring requires capital, and capital can be hard to come by.
When my business partner and I started our first business, we initially used friends and family debt capital until we were large enough to attract more substantial funding from angel investors. The truth is, most small businesses piece together their funding from several different sources phased out over time. No single source of funding is necessarily easier to come by than another. It depends on your business model, projections, and how well you can sell yourself to potential financial partners, for example, in my case, all I needed was a small financial plan with the commercial banking services Whether you are a start-up seeking initial seed capital or an operating small business looking for money to grow, you have to be flexible, remain positive, and stay vigilant in your efforts.
Here are five ways to get started with funding your small business:
Do it yourself. Most entrepreneurs and small business owners these days have come to the realization that they will have to self-fund (also know as “boot-strapping”) their projects for a significant amount of time until more formal funding opportunities become realistic. There are many ways to accomplish this from savings accounts and zero interest credit cards to leveraging other personal assets. If you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing you own money into the business. In turn, this will make potential investors more comfortable knowing you have skin in the game. Just keep your eye on profitability!
Friends, family, and fools. Funding from friends and family is a very popular and effective way to round up some initial capital for a business. Those closest to you are more likely than anyone to believe not only in your vision, but your ability to make that vision a reality. One downside of course is that you are potentially risking personal relationships should the business fail and your agreement not be structured properly. To avoid friends and family feeling like “fools” I recommend structuring this type of funding as a high interest loan for one year. Borrow just enough to launch the business into operations, build your website, or develop some additional pitch material if you want to go after big money. And as much as you will want to avoid racking up legal fees, it is imperative that all parties get sound legal advice. Not doing so can potentially cost you much more down the road.