Working capital is the lifeblood of any business because, without it, you won’t have a business to run. In fact, lack of funding and poor cash flow management are some of the main reasons many companies fail. As a result, small business owners turn to self employed loans and small business loans to fund their operations.
Unfortunately, there isn’t a one-size-fits-all approach to small business financing. You’ll need to assess your business and explore your options before you can pinpoint which financing program works best for you. To help you with your search, here are six innovative ways to increase funds for small businesses.
1. Bootstrap Your Business
If your business isn’t capital intensive, you can consider funding your business venture. Funding your business out of pocket carries many risks, so it’s essential to consider the potential of your business idea. If you truly believe in your vision, you should feel somewhat comfortable investing your money into the business. And if you have a personal stake in your venture, potential investors and lenders will be more willing to partner with you in the future.
You can also apply for a 0% or low-interest APR business credit card if you don’t have enough money to fund your business. Applying for a credit card allows you to borrow cash without worrying about interest.
2. Ask Your Friends and Family
A lot of small business owners rely on friends and family for financial support. If you plan on taking this route, it’s best to choose a friend or family member with excellent business skills. Make a list of people who have faith in your ideas, understand your plans, and are well aware of the risks.
Once you’ve come up with a list, you’ll then need to show that you’re passionate about your business idea. Create a detailed business plan, and be sure to include information about your finances and how much you’ll need.
Lastly, it’s important to determine the form of funding, and this could be structured as a loan or equity in your company. For loans, be sure to agree to a repayment plan and use a P2P website for transparency and easier loan management.
3. Apply for a Personal Loan
Not many small business owners know that you could take out a personal loan to fund your business ventures. Entrepreneurs often pursue this route if they cannot qualify for traditional business loans due to poor credit and lack of business history.
There are several options for business owners looking to apply for a personal loan. You can get them from your local banks, credit unions, or online lenders, such as Giggle Finance, LendingPoint, and LightStream. Many online lenders have fully automated applications that only take a few minutes to complete.
4. Consider Fintech Funding Options
Financial technology (fintech) lenders are private companies that use the latest technology to provide alternative loan options to small business owners. Like personal loans, you can apply for these loans online as more and more fintech lenders are becoming available, such as SMB Compass, Kabbage, and Fundera.
But before you choose a lending company, be sure to check out the track record, application requirements, loan products offered, customer support, and loan terms to find the best option for your business.
5. Find Venture Capitalists (VC)
Venture capitalists (VCs) are investors who prefer to invest in slightly mature businesses, but they generally want to have more say in managing your business. VCs want to achieve sizable returns for the investments they make, so they prefer companies that have a healthy cash flow and a proven business model.
If your company meets their requirements, you can apply for an investment with a reputable venture capitalist firm. In return, they’ll need a seat on your board of directors as well as a percentage of your earnings.
6. Look for Angel Investors
An angel investor is an individual or group of investors willing to provide working capital to startups and small business owners. Unlike venture capitalists, many angel investors are not solely motivated by money. They understand that growing a small business takes time, so they’re willing to accept the risks involved and only demand little to no control in exchange for the chance to own a piece of a potentially profitable business.
Here are some of the websites where you can find potential angel investors: AngelList, SeedInvest, and Life Science Angels.
Secure the Fund You Need and Scale Your Business
Small business owners have several options for business financing. When applying for funding, demonstrate due diligence and don’t get discouraged if one option doesn’t work out. You can always explore other funding programs to figure out which one works best for your business model.