You might be looking to launch an ecommerce store, a service-based business, or a local eatery. Usually, the number one thing that comes up when I ask entrepreneurs “What’s stopping you?” is…
“I don’t have the money.”
Well, here are a few ways that you can get funding for your new business, so no more excuses!
1. Crowdfunding
If your new small business is product-centric, then crowdfunding might be a perfect fit for you!
Crowdfunding works best when you’re looking to raise money to produce a cool new technology, fashion, or design product.
When you launch a Kickstarter or Indiegogo campaign, backers who pledge to your campaign will get to own a copy of your product or its accessories.
2. Loan
Service-oriented small businesses like a deli, restaurant, car repair shop, and more would not be a good fit for crowdfunding, but would be a good fit for a traditional bank loan. You may even qualify for a small business government loan or grant.
Of course, using credit cards to finance a small business is a form of loaning money, but I would not go this route. It’s a lot of unnecessary risk and a high interest rate.
Instead, I’d look into a peer to peer lending platform Prosper or Lending Club to obtain a low interest loan.
3. Friends and Family
Friends and family will almost always give you the best terms, but it comes at another price: your relationship.
There’s nothing worse than having money problems or a bad investment sour your relationship with the people that matter most in life!
I would go extra lengths to lay out the risks inherent in financing your small business and treat your family members or friends like professional investors.
4. Pre-Orders
We’re starting to see more companies use pre-orders as a way to test the market before committing to a new business and to help finance the initial production run of a new product.
I’d underscore that all orders are refundable, unless you hit a certain quantity, which is required by the manufacturer. Otherwise, you might end up raking in a bunch of cash, but not enough to fulfill the orders.
You can use a web store building tool like Shopify with an extension app or create your own website to accept pre-orders using WordPress + WoocCommerce + Bluehost.
5. Joint Partners
Going it alone is tough! Not only do you have to do all of the work yourself (or hire employees), but you also have all of the financial burden on your shoulders.
Bringing in a joint partner who will share in the risk, rewards, and help you get the business up and running is a great way to improve the chances that you’ll build a successful small business.
But, don’t forget. In many ways, a joint partner is like a marriage partner. History is ripe with business relationships that have turned into bitter legal disputes. Don’t jump into a partnership lightly.
6. Investors
Ever heard of Shark Tank? The show highlights angel investors (accredited investors) who help and fund new businesses.
The key to obtaining investment is to first determine which investors you’re going to target and to then get a primer on the metrics and qualitative aspects that matter to an investor.
If an investor isn’t interested in your business, that doesn’t mean that it’s not a good business. It just means that it’s not a good business for them.
They may think the investment is too illiquid, that they’re not going to get a big enough return, or that the market is not large enough.
A good outcome for an entrepreneur, like making $5 million in annual profit after working for 8 years, might be a horrible return for an investor, who may be investing money for other investors and simply need a larger outcome.
7. A Job
Have you heard of the term “bootstrapping?”
Basically, it’s when an entrepreneur funds a company from their own finances, which usually takes the form of savings or another income stream, like a job.
You don’t need to start a full-time small business initially. You can use the income from your job to pay freelancers, part-time employees, or other initial expenses, until you begin to generate enough revenue to go full-time on the business.
If you only take away one thing, remember this: You can’t work on your business while you’re at your actual job or use any materials that belong to your employer.
I would read into employment law and even consult a lawyer to figure out the best way to keep your business activities and your employment separate. You don’t want your employer ending up owning any of your IP.
8. Consulting
Finally, you can also bootstrap your business with consulting work or by offering other services in conjunction with your business.
This is a very common way to support a business in the early days. 37Signals, the maker the popular project management tool, Basecamp, started out as a design firm!
Remember, there are many ways to fund a business. The real question is, which is the best route for you and your venture. If you have any more ideas to get funding for a business, I’d love to hear in a comment below.
