6 Ways You Can Fund A Small Business Effectively
So you got that next great idea for a small business? Now all you need is funding. The question is do you turn to conventional methods such as a bank loan or think outside the box?
#1: Venture Capitalists
Along with traditional loans from a bank going through a venture capitalist is still one of the fundamental options for any startup. Of course, you have to present an idea that sparks their interest so there is a fair amount of work that goes into landing these coveted business partners. But with the right idea (and a little luck) there is nothing that compares to the amount of money these investors can contribute immediately to a startup.
#2: Angel Investors
Angel investors are like venture capitalists as they invest in the early stage of a startup in exchange for a substantial (usually 20-25 percent) return on the investment. They are titled angel investors because they have helped launch little startups with a big idea into a mass of prominence (not to mention gross profit).
#3: Online Lending
The alternative to a traditional loan through a bank — online lenders provide quick answers. For example, the average turnaround on an application for a loan through an online lender is days not weeks. As a result, startups can get approved quicker for funding and start investing immediately.
Businesses focused on science or research may be able to get grants from the government. The SBA offers grants through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. There are some stipulations attached to these grants, but who can beat free money awarded to the investment of your company?
If you are not familiar with the websites Kickstarter or Indiegogo now is the time to conduct a quick Google search. Kickstarter has helped finance thousands of projects by hoping to get very small investments from a large pool of individuals that back the idea of your small business. It’s like the penny jar — it may not look like much but if you get thousands of these contributions you may be stunned to find out how much is inside when you go to count it.
#6: Factoring/Invoice Advances
Through this process, a service provider will front you the money on invoices that have been billed out, which you then pay back once the customer has settled the bill.Therefore, factoring/invoice advances enable the startup to grow the small business by providing the necessary funds while waiting for customers to pay the outstanding invoices.