With one in four businesses folding because they just don’t have access to the cash they need, it’s important to have the right funding structure for your business. Whether you’re creating a new business venture or experiencing growth, much of your value might not be accessible to put into a business. Finding the right way to fund your business requires a combination of goodwill and savvy.
If you’re worried about whether or not your business will be able to get the money it needs to grow, try these 7 methods to get financing for it.
1. Apply for a Bank Loan
One of the most common ways for businesses to ensure that they get the funding they need to get off the ground is to get a loan from a bank. Once you build up credit and a solid relationship with a bank, you can ask for an increased investment each time.
So long as you pay your loans on time and pay them down whenever you can, your bank will trust you enough to loan you more money.
Some banks have money specifically earmarked for small businesses. If you’ve been with a bank for several years and have always paid on time, you can assure that your bank will take your application seriously. If you have the time, be sure that you start building a relationship with a loan officer now.
If you’re looking for non-standard types of loans, check out what this company has to offer.
2. Use Your Credit Card
Instead of going through the process of applying for a loan, meeting with officers, and waiting for funding, you could always use your credit card. This can be a tricky proposition but if you’ve got good credit and just need to make a few purchases that fit within your credit limit, you should consider it.
If your office needs $5,000 worth of HVAC work or tech equipment, it could make more sense to just get it done with a credit card.
If you fear you won’t be able to pay it off quickly in a lump sum, stay away from this idea. Interest could end up costing you more than you bargained for if you don’t prepare yourself.
Credit cards can get you out of a temporary jam but they can also get you into a permanent rut.
3. Use Your 401(k)
It’s a hard decision to make but if you’ve been accruing money in your retirement accounts in a diligent manner, you should consider using it for your business. What good is money you’re saving if it’s not going to what you love and care about?
If you follow certain steps, you can even withdraw money from your account without incurring any penalties. Despite the legal complexity, it might be worthwhile to go through the steps.
You should only take this route if you’re growing a current business or investing where you know you’ll receive a return. If you don’t at least withdraw the amount you’re about to invest from your business, you’ll be gambling with your own nest egg.
Think carefully before taking this route.
4. Crowd funding Works
If you’ve got a million dollar idea, you could raise several thousand in just the span of a week or two. Crowdfunding is a great way to receive lots of help with zero requirements to pay interest. The only things you’ll feel obligated to offer are exclusive deals and discounts to the people who help you get your business off the ground.
Crowdfunding is a great way to engage your audience in what you’ll be doing. You can use the format to create a promotional video for your product while also asking for funding. You can show off what a great idea you have and how you hope for it to grow.
Most people don’t invest much thought in a company when they buy a product. That alienated exchange prohibits companies from building a strong connection with their customer base. When you use crowdfunding, you build a dedicated customer base by touching them in a unique way and making them feel connected to your success.
5. Pledge Your Earnings
When you are looking for funding from investors, friends, and family, they might want to get involved but they might also be weighing philanthropic interests. If you’re dedicated to helping other businesses or engaging with the community, make that part of your mission statement from the start.
When you pledge to spend some of your future profits on community-based initiatives, you draw a line in the sand from day one. You’re telling potential investors that you care about the world around your company and are committed to helping it grow.
When you state a specific percentage you aim to contribute to a cause or for furthering other business ventures, you show investors you have a long view. They will be encouraged to get involved with your company and support you, knowing that their money funds more than just your business, but the future.
6. Get an Angel Investor
While attracting an angel investor is easier said than done, there are some basic rules that can help you gain their trust and their investment.
Be sure that your presentation is succinct. An angel investors’ time is valuable, so when you get the chance to sit down with them, have a brief and clear presentation with room to elaborate. They’ll appreciate the fact that you respect their time and will be more likely to write you a check on the spot.
Don’t use a lot of jargon when you’re describing the idea. A good idea doesn’t need to rely on buzzwords and the history of an entire industry to stand on its own.
Let them know a clear exit strategy. You should have a projected date where you’re making enough money to pay off everyone’s initial investment with a way for each investor to exit. You should have a way to describe how your business will survive without those key investors.
If you’re truly passionate about the industry, let it show. Show that you have knowledge but stay away from those jargony buzzwords as mentioned. A knowledgeable industry insider can describe things with inclusive language.
If you have advisors who are willing to help you manage for the first few years, add them to your team. Show them off to investors and tout their experience as one of the reasons you know you won’t fail. More skittish investors will feel relaxed knowing that you have experienced advisors in your circle.
Make sure you check in with your angel investors as often as possible. They’ll want to know how their investment is growing and what, if anything, they can do to help you leap over any hurdles.
7. Get Help From Family and Friends
If you’ve been building a network of people who know how hard you work and how dedicated you are, you won’t have trouble finding people who can invest. Your friends and family have been watching you grow for years and want to see you succeed. If they’ve seen you hustling to turn nothing into something, they can imagine what a properly funded venture could do.
It might feel a little uncomfortable at first to ask friends and family for money but it’s necessary if you want your business to grow. You need a dedicated circle of people who are ready to stand for you, win or lose.
The people who’ve been there for you emotionally, professionally, and personally are sure to be excited to see what you want to do with your business.
Just because you’re talking to friends and family doesn’t mean you can do away with formality. You shouldn’t go knocking on their doors without a strong business plan in place. Once you start talking about business, you’re going to be expected to answer dozens of questions about how your business is going to succeed.
Without being properly prepared, you’re sure to be blindsided by the kinds of deep inquiries you might never have expected from a gym buddy or an older uncle.
They’ll want to know whether or not they’ll be offered equity or whether this is a loan. If they want equity, it means they’ll want to help to steer the company. If this is the case, you might want to carefully consider who you ask.
Don’t ask anyone who you can’t handle taking business advice from because even if you’re paying back with interest, you’re going to be hearing lots of criticism.