One of the biggest challenges that small business entrepreneurs experienced through history is merely generating enough income to start or expand their business. Start-up financing, believe it or not, is a huge consideration and a vital decision for any aspiring entrepreneur. While financing still remains the deepest concern for those who own a business, new trends are constantly sprouting, which aim to streamline the process.
There are plenty of ways to fund a start-up, and whether you decide to borrow money, dip into your savings or go another path, you should understand your options before you choose.
While these innovative methods are far from the only ways to finance your start-up, here are some of the most popular methods today’s entrepreneurs choose.
Crowdfunding
Crowdfunding is rapidly becoming a popular method for small business owners to finance their businesses. If you already have an idea that will grow your business and all you need is a cash injection to go there, then crowdfunding might be the way. What is crowdfunding? The idea is simple: All you have to do is to offer an idea that people or potential investors would love to support with small-dollar donations. Thanks to the internet, if you have the right kind of service, product or an innovative project, you can launch your campaign via a crowdfunding platform. With some cunning marketing skills, you have the ability to get your idea in front of hundreds, even thousands of potential donors.
For many entrepreneurs, crowdfunding means all the buzz in start-up circles, but it’s also being used by small businesses to expand. Through crowdfunding, you can find backers for a wide variety of campaigns, services, products and projects.
Surprisingly, the internet booms with people eager to support innovative products and new concepts, or who wish to get in on the development of small businesses. Through crowdfunding, the opportunities are as wide pone as your creativity, however, some of the most familiar ways crowdfunding can be used to extend a business are:
- Purchase real estate
- Hire employees
- Launch new product
- Buy new equipment
- For non-profits: raise donations
- Raise venture capital
Alternative Lending
Almost all businesses experience financial challenges from time to time. Regardless of the size, every business requires credit access to thrive and survive. So, trust us when we tell you there is no shame in seeking financing solutions. In recent years, the story surrounding the financial industry has often been about change. Funding, specifically, has experienced a more significant change in conducting business. Addressing the challenges of traditional lending and adjusting to the new dynamic of the technological age, the lending industry has revolutionized.
Why should you consider alternative lending? Whether you need money to start a new company, expand the existing one or need a cash injection to continue operations and manage your business car loans, alternative lending sources can provide you with various borrowing options.
- Flexible Qualification Criteria
Because banks are more likely to reject small business loans and prefer to lend to reputable businesses, alternative lenders maintain their lending criteria easier and extend loans for businesses with a lower credit score.
- Quicker and Easier Access to Funds
Goodbye, repetitive legwork and tedious paperwork. You can now obtain financing for your start-up right from the smartphone. And since alternative lending isn’t affected by red tape and regulations as much as for banking lenders, access to capital is way faster.
- Lower and Simpler Free Structure
In order to balance the scale outs of extending loans to late businesses with lower credit scores, alternatives lenders might charge high-interest rates. However, there are a few lending options that are still competitive in pricing. For instance, Invoice Factoring allows businesses to maintain their cash flow and fill the gap between receivables without paying heavy charges.
Bootstrapping
Bootstrapping has always been a popular yet risky option to finance a small business. Most probably you’re familiar with the phrase” bootstraps your small business”. What is bootstrapping? To bootstrap, a business means managing your business using your own cash reserves instead of relying upon other financial resources.
Since you’re depending on your own funds bootstrapping is generally made on a defined budget. Most start-up entrepreneurs discuss getting their business bootstrapped where the majority weren’t self-reliant wealthy and didn’t have millions under their belts.
That said, many small business entrepreneurs can self-finance themselves. And that doesn’t really mean you can’t raise venture capital or apply for a small business loan later. Actually, many lenders and investors are eager to see how you can manage your own business with a small budget.
Traditional Bank and Small Business Administration Loans
Small business administration and traditional bank loans remain one of the most common ways to finance a start-up. Entrepreneurs may opt to secure a business loan through a local or SBA’s lending program or National bank.
Many small businesses owners state that the traditional lending option offers them steadiness over financing strategies and a sense of security. Others, on the other side, claim that they cannot qualify for these loans or decide that they are not satisfied with the terms and conditions set forth by lenders.
Fundraising
When you’re starting a new business, funding commands how much you can afford to initiate a market, pay for a location and promotional activities, purchase supplies, hire staff and equipment. Small business owners who wish to extend their start-up funding come up with a wide range of fundraising ideas to get their ventures started.
The most common and effective way to start fundraising is through events. You can earn money for your business by hosting an event such as a cocktail party, dinner or brunch. Invite family members, friends and business colleagues. Charge groups and individuals to attend the brunch and let businesses to act as sponsors. Additionally, you can promote your event on various social media platforms with a press release and with a well-made website that provides the event details and sponsorship opportunities and describes that the purpose of the event is to raise money to expand your start-up.