Capital is essential for new and growing small businesses. Whether your small business is just starting out or expanding, raising capital can be challenging. Consider these smart financial strategies for funding your small business venture.
Get a Loan Using the SBA Tool
The U.S. Small Business Association (SBA) exists so small businesses such as yours succeed, so make sure you don’t overlook this valuable government resource. Its Lender Match tool helps you find SBA-approved loans for launching and expanding small business operations. These loans are often easier for small businesses to obtain than loans from their own banks, but they have very competitive terms. Some even have unique benefits such as flexible overhead requirements, lower down payments, and ongoing business counseling.
Secure Angel Investor Funding
Angel investors are wealthy people who put their own money into start-up businesses they believe in for equity ownership interest. In addition to funding, many also provide advice or mentorship.
It takes strong networking skills to impress these cashed-up individuals. Practice speaking about your small business and your vision for its future so you can turn on the charm at industry events. Even with the gift of the gab, securing angel investor funding often takes time. However, with average investments between $25,000 and $100,000, your perseverance can pay off. Angel investor networks can help you connect with angel investors in your local area.
S and C corporations can legally sell stock to raise capital. If you’re not currently operating under one of these business structures, tax and legal advisors can help you file the right paperwork to make the change. Becoming an S corporation is the cheapest option but these businesses have limited money-making potential, as they can have no more than 100 shareholders. However, many small businesses do not want to surrender control to more shareholders. Operating as an S corporation suits these businesses, who prefer dealing with a much smaller pool of investors.
After becoming a corporation, you can then take steps to sell stocks publicly or privately. This includes creating a prospectus, which to entice investors to buy shares in your company. Successful investors know how to make money in stocks and won’t invest in a company that doesn’t show good potential for growth.
Crowdfunding isn’t subject to the same legal restrictions as selling stocks, so it can be a great option for new and expanding businesses. Well-known platforms such as Indiegogo and Kickstarter expose businesses to a large pool of potential investors. Research each platform carefully, as each one has its own rules and quirks.
The most successful crowdfunding campaigns give donors a good return on their investment. For example, businesses might focus a crowdfunding campaign on producing a new product. Donors who pledge a certain amount would receive the product first. Generations X and Y are more likely to donate to crowdfunding campaigns than baby boomers and seniors, so companies with youthful images are more likely to get results.
Consider how much money you require and when you need it to determine the right money-making strategies for your business. A financial adviser can help you make the right funding decisions for your small business.