If starting a small business is a dream of yours, then you should consider this dream when setting your financial goals for the new year. Launching a small business takes hard work and may require you to go weeks or months without taking home a paycheck, so you’ll need to do your research before making any big decisions.
Figuring out the financial side of opening and running your small business is an important step. Your own investment may cover some of the costs, but many small business owners need more financial support up front. Here are five strategies to source funds for your small business.
Find a Business Partner
If you’re looking for assistance getting your business off the ground—especially assistance in non-financial matters, such as marketing or business development—then a business partner could be a good option. You can work with that individual to determine whether they can provide an up-front investment to the company.
Because the terms of a partnership are always negotiable, you can balance your financial needs with the partner’s stake in the company, their day-to-day involvement, and other expectations before you sign an agreement.
Apply for an SBA Loan
Small business owners can seek out a Small Business Administration (SBA) loan from their local bank. This is a partially guaranteed loan that takes some of the risk off of banks providing the loans, in exchange for those banks offering lending services to stimulate small business growth across the country.
To qualify for an SBA loan, you must meet a stringent set of expectations. These include strong personal credit, collateral for the loan, a business plan, cash flow projections, and other relevant information and documents.
Get more tips on how to qualify for an SBA loan by checking out our online SBA coaching tool. And use this resource to make sure you’ve got the right documentation when it comes time to apply for funding.
Launch a Crowdfunding Campaign
Crowdfunding campaigns through Kickstarter and other platforms have become a popular strategy for raising funds to launch a new business. This can be a great strategy if you have a relatable message or a story to tell that supports your reason for launching your business.
You can also consider pre-selling products, offering gift cards, or providing other rewards that can generate sales for your business ahead of your opening, giving you some early revenue to cover opening costs.
Try Peer-to-Peer Lending
If you’re looking to raise capital from unfamiliar lenders or investors, consider using peer-to-peer (P2P) lending solutions to raise capital based on your overall risk profile and profit potential.
P2P platforms such as LendingClub and Prosper can help you secure funding for your business when more traditional financing paths aren’t an option. You can use these platforms to secure investors, keep records, and even transfer funds between lending sources and your business.
Use a Business Credit Card—with Caution
If you only need a small amount of credit to cover certain business costs, a business credit card can offer some spending flexibility to help bridge the gap.
Just be careful when using credit cards to cover business expenses. Instead of putting every expense on a card, look for other methods of building funds and growing revenue first.
If starting a small business is a dream of yours, why wait to get started? One of the best steps you can take early on is to identify your best options for funding. And remember that regardless of where you turn to secure your business funding, your company will benefit from you doing your homework and developing a plan for exactly how your business will drive revenues and turn a profit.