Funding Your Small Business

So, you have a million-dollar idea! But before you can turn it into a profitable business, you need funds. Getting funds seems like an uphill task. How can a small business without capital or credentials get the required amount of money to even get started?

But nothing is impossible. Here are some proven ways to get small businesses the funding they need:

 

1. Do it yourself: Self-funding (also known as boot-strapping) is worth considering if you can leverage your personal assets. What is crucial here is self-belief. You must have absolute confidence in your vision and be certain of winning. You must absolutely refuse to accept failure as an option. You are investing your own money and, literally, going for broke. Potential investors will see this as a positive sign and have more confidence in you and your idea.

 

2. Borrow from friends and family: You could round up some capital by approaching friends and members of your family. Whether they believe in your idea or not, they are doing it for you. So far so good. But however close the personal ties, you need more than a handshake. It is always advisable to put the loan on a business footing. Get legal help and draw up a contract. That way it becomes a business deal and you do not risk endangering the relationship.

 

3. Get a small business loan: This means having a good business plan in place, making profitable projections and putting some of your own money in the game. The thing to watch out for is not giving away a piece of your business or control over your business.

 

4. Angel investors or venture capitalists: They will be investing in you as well as your idea. Getting funds through this route will help you over those initial hassles of constantly having to pay money out without seeing anything coming in. However, be prepared to spend a lot of time with the angel investor or venture capitalist before the investment can be finalised. It may mean having a member of the team focussing only on this as every aspect of your business plan is gone over in detail. It’s important to be transparent, back up valuations with real projections. You need to build a relationship with your investor and create trust. Investors generally give funds in exchange for equity. Entrepreneurs would do well to get experienced mentors on board to give the idea the maximum chance to succeed and to accelerate the development of your start-up.

 

5. Crowdfunding: This is a means of funding that raises money from a large number of people. It generally harnesses the power of social networking to raise awareness of your project and draw contributions from a host of people. Start by connecting with people you know—family, friends, co-workers, acquaintances and build from that base online. You need a compelling pitch that talks about the uniqueness of your idea and inspire people to invest in it. Done properly with professional advice, crowdfunding is a good way to raise funds. Make sure you have all the legal angles covered.

No single source of funding is better than another. It all depends on your business model projections and how you can sell yourself to potential financial partners. Whether you are a start-up seeking initial seed capital or a small business looking to grow, you have to be flexible, remain positive and have staying power. Your vision, your total belief in your idea whatever the odds, will be the ultimate deciding point.

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