Around 56.8 million people in the United States are employed in small businesses.
One of the challenges that small business owners and entrepreneurs face is getting funds to launch and grow their businesses. Funding has its highs and lows and various investors look for certain requirements before providing financial support.
There are various strategies that an entrepreneur needs to follow in the process of fundraising in all stages of the business life cycle.
Below are 7 tips and strategies on how to get funding for a business idea.
1. Start with Bootstrapping
Bootstrapping means using your personal funds to finance your company when getting started. You can use some of your home equity lines, credit cards, and savings account.
It’s advisable to bootstrap instead of borrowing until your company is profitable. The importance of using your own money is to avoid monthly payments and extensive loans.
2. Borrow from Close Family and Friends
You may consider outside sources of money especially if you look to grow your business quickly.
Prepare a detailed business plan to convince those close to you that your business is authentic. Also, explain to them the products you’re dealing with and how you’re looking to make money from your business.
Before going for external entrepreneurship funding, try and get some financial support from those closest to you.
3. Look for Alternative Funding Sources
Explore some micro-loan organizations that lend small amounts of money to entrepreneurs and start-ups. There are crowd-funding sites, which provide a platform to fund-raise money from people across the web.
Such sites also allow for donors to fund your business. You’re required to describe the nature of your business and the money you intend to raise.
Also, you can opt for formula funding to get working capital for your small and growing business. In formula funding, you do not require any paperwork. They have a team where you get the required information concerning the type of loan that you qualify for.
Working capital will help you cover unexpected expenses such as repairing equipment.
4. Angel Investors
Approach angel investors once your business is grown and you experience a steady revenue.
Angel investors are normally a group of people or an individual who pool their resources and research to fund an entrepreneur in exchange for ownership equity or convertible debt.
Such groups are available online and within communities. Angel investors investigate whether or not your business meets their requirements before funding it.
5. Venture Loan or Bank Loan
Your business may need bank loans in its later stages.
Bank loans assist in long-term capital and operating capital. Financial institutions require you to provide financial information on yourself and the business before they secure the funding you.
The largest distributors of grants are government agencies.
Research the process of applying for such grants. They’re helpful, especially if you’re a small business owner since you don’t have to pay them back.
7. Look Local
Small business development centers are common in most local areas and universities.
The centers can help you identify the type of loans that your business qualifies for. Also, they help you connect with angel investors for funding and other entrepreneurs for networking.
How to Get Funding for a Business Idea
If you’re wondering how to get funding for a business idea, consider the above tips and strategies.
Create a business plan to convince financial institutions and individuals to support your start-up. Whatever the stage of your business, it’s likely you will eventually require additional financial support.