One of the greatest challenges in starting or owning a small business can come from trying to get the necessary financing and funding. The good news is that there isn’t just one right way to do it! Most companies try to obtain business loans or investors for their businesses; however, there may be more creative solutions that work for your business.
In anticipation of CredibilityLIVE with Steve Strauss today, here are some ideas and tips to get your small business the funding it needs:
- Look to angel investors and venture capitalists. Angel investors are more likely to take risks than banks and will provide funding for a longer period of time. Venture capitalists look for a high growth potential and a more secure investment, but generally invest more money in the business.
- Commercial bank loans are another option. A major benefit of these loans is that you don’t have to give up any control of the company for the loan, but they can be hard for newer companies to repay. Newer businesses may also have trouble getting loans because they don’t have history or collateral.
- The Small Business Administration can help obtain bank loans. If your business cannot qualify for a regular loan, but you are willing to personally guarantee a loan to the SBA while demonstrating sufficient cash flow, the SBA will help guarantee loans made by private lenders.
- Home-equity loans are risky, but may be worth it. Home-equity loans offer the lowest interest rates but the risk/reward potential should be heavily weighed before risking your home for your business.
- Craft a strong business plan. A good business plan should detail specifically how much money you need, what you need it for, how you plan to repay it, when you plan to repay it, and what you will do if you do not get the loan.
- Make your loan application stand out. Your loan application should be detailed; it should provide risk analysis, offer different sources of repayment, and anticipate questions from the reviewers. Your application should also offer information about your personal history, reputation, and your understanding of the economy/other conditions.
- Use different methods to raise capital. Selling assets, though seemingly counter-intuitive can help to create an inexpensive way to raise capital. By selling assets that are not producing, the capital you raise can help to fund other assets to generate more cash flow.
- Working capital can help your business expand. You can determine your working capital by subtracting your current liabilities from your short term assets. This is normally used to deal with any problems that may come your way. Through careful management, the working capital can be used to expand your business.
Do you have tips for businesses looking to get funding? Use the hashtag #FundingTips within a tweet and we’ll include the highlights below!
UPDATE: Tips from Twitter:
Dotcomweavers Inc (@Dotcomweavers) has a few tips:
Caroline Broquere (@ohh_la_la) agrees:
Mark Eisner (@Alwi_Eisner) weighed in:
Kali (@yourfrontstep) also advises having a great business plan: