When I speak to my clients about their business. Lack of money seems to be the main factor. While everyone would love to have the millionaire next door come and hand them a wad of cash, it is not likely to happen. With shows like Shark Tank showing success stories, everyone is trying to find that magic that will convince someone to invest in their idea. If you do not have a millionaire to lean on or cannot get on Shark Tank, here are some ways to get your small business funded.
IT STARTS WITH YOU
Invest in yourself! So, this may be hard to hear but no one is going to want to invest in your business if you have not. I have many clients that have great ideas and they want to get a bank loan or find a grant. Here is the thing, if you do not have any money or assets, a bank is not going to loan to you. Business grants are like the end of the rainbow. There is a pot of gold waiting for you if you happen to find it. You have to be willing to put up money and time to get your business growing.
Many people know about Crowdfunding. What they do not know is how it works. There are two major crowdfunding sites: Kickstarter and Indigogo. Kickstarter is a project based site. Kickstarter screens for projects and makes sure you are not just selling your product. It does not work for service based businesses. If you have a product, you really should consider Kickstarter. Also with Kickstarter, you have a well-known name behind your project. However, with Kickstarter it is all or nothing. If you do not meet your goal, you get nothing.
Indigogo, is great for any business. Indigogo prides itself on allowing you to keep the funds from the crowdfunding campaign regardless of whether or not you meet your goal. It is also international and there are broad categories that you are sure to fit into. There is no application process and you can start your campaign without any delay.
However before you try either, you need to have a base. Neither of these sites will create donors for you. While some will find your campaign by searching the site, you really have to have a following that is willing to help promote the campaign and contribute to it. It really is a lot of work. You will spend considerable hours working toward building the campaign as well as running it. Once you meet your goal, you will have the added pressure of meeting the expectations of your backers. And then, there is what you do after the crowdfunding campaign is over?
If crowdfunding is not for you, and you would prefer to have one or a few individuals back you there are many ways to do it. I certainly believe that accelerators can be good training grounds for businesses. Startup accelerator programs help entrepreneurs receive mentorship and training from like-minded people who have had successful businesses. In many cases, startup finance is available. Of course, none of this is free. You may have to fork over some interest in your company, how much will depend upon the accelerator.
Another option is to find investment groups. Everyone these days are having their own Shark Tank experience. There are groups on MeetUp that allow you to pitch to their group. Many colleges and universities are offering the same things to their business students. They allow you to demo and pitch your idea. There are usually several investors as well as others attendees in the crowd. You never know who is listening.
If none of the above options is your cup of tea, then there is such a thing as alternative lending. A Cash Advance is like a personal loan but is specifically tailored for small businesses. You can acquire as much as $250,000.00 and repay the loan based on future sales. They provide small business having bad or no credit history. It is usually an unsecured loan and carries a high interest rate.
An alternative funder is a mix between a cash advance companies and traditional banks. There are many alternative funders that offer a middle ground between banks and cash advance lenders. They focus on “mid-prime” businesses that do not qualify for bank loans. Therefore their rates are higher than traditional bank loans but lower than that of a cash advance. Alternative funders usually require a personal guarantee or business assets as collateral.
Shahara Wright is an experienced and highly sought after business law attorney and business strategist. She is the author of From Entrepreneur to CEO and host of the CEO Collaboration Circle. Shahara founded The CEO Effect, LLC to work with small business owners who want to implement strategy to build capacity.