When running your own business you soon realize that managing cash flow is harder than you initially anticipated. In many cases businesspeople will need capital that they cannot acquire without outside aid. The need for funding will probably appear and then the entrepreneur will start exploring their options.
Fortunately, in today’s age, there are many ways to get cash beside the traditional bank loan. Business owners can use a combination of traditional and new ways of funding to broaden their options. This is not to be translated that getting funds will be easy, but at least the business owner can find alternative ways to acquire the funds that they need.
1. Try Crowdfunding
If you believe you have a wonderful idea that will make other people wanting to help you financially to bring it to life, then crowdfunding is a good way to get some funds. To help you get the word out there are a few of crowdfunding platforms to choose from, with Kickstarter to be one of the most recommended.
What’s great about Kickstarter, is that it categorises funding projects, and once your project has been approved, then you can set your own goals. Other options of crowdfunding platforms include Indiegogo, Causes which is primarily used for non-profit organisations, Rockethub, Patreon, and others.
That said, to get success through crowdfunding, you will need a strong online social network, since many crowdfunders will consider the number of followers you have to analyse the reach of their investment.
2. Appeal to an Angel Investor
Whether you are trying to upscale, or need funding for a new project, an angel investor can come to the rescue. Angel investors will not only give you the capital you need, but will also share their business knowledge. So, in order to impress them you should have excellent knowledge of what you are attempting to do in order to convince them to invest.
A detailed and reliable business plan is an essential requirement and should be carefully checked for any errors and oversights. Angel investors will be interested to see that you do have a course mapped out, your moves have been thought out, you are aware of your environment, and most importantly that you have an exit strategy in place.
Kasey Wehrum suggests that when you present your idea to an angel, have someone with experience as a managerial figure within your company.
3. Get a Grant
Surely enough there are grants out there available for businesspeople and entrepreneurs. Some of these grants are intended to promote technology and innovation, others to boost female entrepreneurship, and others to promote young entrepreneurship. Whatever their purpose may be, many countries and areas have their own programmes for funding and with websites where you can find all relevant information.
In the UK, for example, one can find information on small business grants from The Entrepreneur Handbook, and in the USA a good start for your research is the Federal Grants web portal.
If you live in Europe you can also find funding from the EU which provides various funding programmes to its member states’ citizens.
Despite your location, have in mind that grants are most likely given to support local business people, and they do not just donate money. In most, if not in all cases, money granted to entrepreneurs is carefully monitored and audited for posterity.
4. Find Venture Funding
In case you are willing to offer shares of your company then venture capital could be one alternative to bank loans and a good way to acquire much-needed capital. The main benefit here, in comparison to bank loans, is the fact that you are trading a stake in company instead of accumulating debt (like you would with a loan). This is especially beneficial for startup companies that have no track record or credit history and which make it more challenging to acquire a bank loan.
Those who may be interested in acquiring a share in your business are firms that engage in venture capital investment (venture capital firms) and angel investors. One place to attempt and find sources for venture capital is here.
In case you want to read what others have to say about venture capital, discuss about other’s experiences or seek advice by more experienced than you lenders and borrowers then "The Funded" might be a website you want to visit.
5. Consider Factoring
Is your business already in operation and do you need money fast to fund your next project, or to buy new supplies? Then factoring is also an option available to you.
Factoring or invoice finance is a finance method where a company agrees to sell their invoices to a factoring company at a discount for cash up-front. One other benefit of this way of funding is the fact that some of the factoring companies can manage credit control which means you don’t need to waste administration time and effort to chase customers for paying. However, it’s also an expensive way of gaining funding’ usually, there is a high fee attached to companies selling receivables, so calculate the interest you will pay before you sign any agreements!
If you do not wish to create debt or give up a portion of the company by involving an investor for funding, then bootstrapping is the way to go. In this case, the company funds itself by using a percentage of the business's profits to reinvest into the company.
Although it sounds simple, Bootstrapping requires much self-discipline from the side of the entrepreneur. Costs must be handled very carefully, and planning should be done around the budget. If, for example, you are in the early days of business and don’t require offices or a store front, avoid the cost by working from home. Alternatively, you can manage your inventory by choosing distributors and suppliers that will directly ship your product to avoid storage costs.
Bootstrapping can often be challenging, depending of course on the type of business you wish to enter and is only an option if you have a good profit turnover.
7. Ask Your Family and Friends
Relying on family and friends for investment is a common route to take if you’re a startup. You don’t usually have to convince them of your idea, but it’s wise to have a business plan in place to avoid any unpleasant surprises.
To make things more official, draw up contracts for them to sign so you are both covered and understand the terms of the agreement. It will not only ensure that you will receive the money, but can also save the risk of you ruining personal relationships along the way.
8. Pay With Your Credit Card
Your credit card is a quick way to pay for an equipment and raw material, or even cover costs necessary to provide a service to a customer. But one should be very careful on doing so, because failure to pay on time will result in damaging the credit card user’s credit history. Also by paying a minimum amount every month will end up in paying a lot more than the amount borrowed. Nonetheless if used wisely, the credit card could help you in times when you need quick money.
9. Apply For a Microloan
Since it is usually easier to get a microloan than a traditional bank loan, applying for a microloan could help those that are starting now their entrepreneurial process. It is a good idea to see what options are out there before you apply depending on where you live. Accion, SBA, and Kiva are some of the organizations that provide microloans.
One benefit of this type of funding is that in many cases microlenders act as counselors, helping the entrepreneur in various aspects like improving their business plans or set marketing strategies. One other benefit of microloans, is that you can get a loan even if your credit is not perfect or you don’t have one the first place.
Whether you need money to start a business or expand an existing business model, there are many ways to try and attract funding. Depending on which stage you are in your entrepreneurial attempt you can reach out and see what the best option is for you.