Today’s world facilitates many creative methods for business owners to find funding for their projects. Entrepreneurs are now more connected than ever before thanks to the Internet. Investors can be found and contacted more easily. In addition, there are other fresh methods to gain access to legit sources of capital. So, without further ado let’s see which are the five realistic ways through which you can fund your business.
1. Angel Investors
Angel investors are entrepreneurs who are looking for their next successful investment. Once they found an interesting business that needs help to grow, they will put capital at their disposal. In exchange, Angel investors usually ask for convertible debt or equity in the business. Basically, it looks like a win-win kind of collaboration.
In the U.S. only, angel investors support around 60,000 companies for $20 billion each year. Normally, your business can receive at least $25,000. Depending on the annual revenue you can produce, the funds can even go beyond $100,000.
There are several online platforms where you can contact angel investors such as Angel List, Gust or Angel Capital Association. However, you can also ask your local chamber of commerce. The authorities here might know businesspersons that are willing to invest in your company.
However, finding an angel is not the most difficult task. They will not risk large budgets for a business without the presence of well-built financial projections. They are looking for a concise business plan, interesting market niches, excellent intellectual property and other reassurances for success. So, you might need to gain access to online courses to learn key concepts like monthly burn rate, how to project revenues based on facts, gross margins or unit economics.
Crowdfunding is a new method of raising funds that come with a lot of perks for both sides. You gain access to a source of enough capital for your business growth, while on the other side of the bargain stands than just one investor. Basically, you present your business to a large community, and each willing member contributes. This is an easy way to raise money with the help of the Internet. The ordinary citizen can become an investor for small businesses whose products or services appeal to them. You get to persuade them with convincing reasons, and they can contribute with small amounts of around $100.
All you have to do is to present your case to a large online community. There are many websites where you can create a profile as a business owner like Kickstarter, Indiegogo, and GoFundMe. Once you sign up, you can start building your case in favor of your business. You get to make public your business description, and anybody can access it and understand what there is in it for them. Usually, the benefit for crowdfunding investors is receiving the product or services free of charge. Since you are addressing the masses, you won’t need to focus on business plans. Instead, you should use some marketing techniques to show interested investors how your products will make up for their funding.
3. Community Banks
Big banks may lead more to an investment loss than a win, so they are not a viable solution for all business owners. However, the community banks offer an easier way to access capital loans. During recent years, lending approvals scored a higher rate within small banks than the big banks could.
Furthermore, since community banks operate only in a limited area, they are more interested in values than large interest rates. They will first assess the positive impact your business can bring to the local community. Consequently, you should concentrate your pitch around the benefits you can offer to local needs. The best advantage of getting your funds from a community bank is that you don’t need to give up equity.
Before launching in an elaborate search for outside funds, you might consider turning to bootstrapping first. This means that you can get funding internally from your own business. However, it requires a strict financial plan, payments restriction, and many other strategies to limit your purchasing decisions. In other words, you can spend your dollars only when there are high chances you will get a good return on investment.
The business development will be supported only by its internal cash flow. You can reinvest the profits you gain through your products or services in business growth. While it will require an exemplary financial discipline, there are many benefits. You will be able to focus on your clients instead of investors. Thus, your company will experience a higher engagement with people that really count to you, namely the customers. Furthermore, you will not be obliged to give up on equity since there is no external support involved.
5. Start a Buffer
A side project will help you unlock a new source of capital, and you won’t depend anymore on external help. While it will be a period of many time-consuming tasks and deadlines, you can fill in your funding needs this way. Since you already are a business owner, you do possess solid notions of how to find a new winning idea.
This is far for being an unprecedented move. For example, Airbnb has also refused any help outside the company. Instead, they took the matter into their own hands and started a side project. This is why Airbnb sold cereals in the shape of “O”s, the initial of Barack Obama. And thanks to this fantastic move, today their company is worth billions of dollars.
So, these are the five realistic ways to fund your business. Each and one of them requires a lot of effort on your part, but the results will be more than satisfying.