As a small business owner committed to the improvement of your company, you have probably already concluded that you need additional funding to meet expenses and spur growth. However, statistics show that less than half the businesses that apply for financing receive approval. One strategy that can up your chances for approval is the creation of a plan for strategic growth, which includes a forecast of how much funding you need and how and when you would spend it. When your plan is ready, here are some of the most common methods of business financing you can pursue.
Bootstrap Your Business
When you bootstrap your business, you fund it yourself through savings, credit cards, personal loans, and other means. Bootstrapping gives you the advantage of retaining full ownership and control of your company, but it necessitates a rapid production of revenue so you have sufficient working capital to keep your business going.
Receive Help from Family and Friends
Family and friends may be able to lend you money to help you get your business started. Even with people you know intimately, though, prepare a legal business arrangement so that you do not unnecessarily squabble about business financing details.
Obtain a Loan
You may be able to qualify for a medium or long-term loan from a bank or credit union. However, be prepared to provide collateral or your guarantee. An especially desirable option is to work through a Small Business Development Center to obtain a loan backed by the U.S. Small Business Administration.
Solicit Donors on a Crowdfunding Site
Crowdfunding your business involves requesting donations from individuals on crowdfunding platforms. In return for their assistance in business financing, you offer a range of rewards. Before you commit to working on a specific crowdfunding site, carefully read its terms and conditions.
Approach Angel Investors or Venture Capitalists
Angel investors invest in companies in exchange for ownership equity or convertible debt. They may invest anywhere from $50 thousand to $2 million. Angel investors may not be the best option if you are planning to retain your business and grow it gradually over time. Venture capitalists may invest from $500 thousand to $10 million in a business, but they expect rapid growth and a high rate of return.
For more advice on business financing, contact Commercial One Group.