Creative Funding for Your Small Business
by Christina Gage and Shelly Gore
Do you know that from 1987 to 1999, the number of women-owned businesses grew 103%, or one and a half times the national average? If you’ve got a great idea and want to start your own business, or if you’re already a business owner but need an infusion of capital to get it off the ground, you’re probably wondering how to get funding. It’s often much easier for a mid-size or large company to get financing. Let’s take a look at some creative ways to fund your small business.
It’s Personal
You might be surprised at how many assets you already have that can be turned into start-up or growth capital. Most small business owners leverage their own equity, at least in part, to get started. You can consider using money tucked away in a savings account or look into an equity line against the equity in your home. If you only need a short-term loan, you might use your credit cards, but be sure that you’ll be able to pay that money back quickly as interest rates on your plastic are sure to be higher than other sources. If your business is promising and you’ve got a solid business plan to support it, then your future success will more than pay for an early personal investment in your own ideas.
Go to the Bank
With interest rates still so low, you might consider getting a loan from your bank. It’s best to work with a bank where you already have a relationship – you’ll have a much easier time that way. Banks will want to see some history on you and your business, so hopefully you created a legal entity and opened a bank account as soon as you got your idea. If you haven’t done this, do it now! It sounds much better to say that you’ve been in business for a couple of years, than to say that you’ve been thinking about it for that long. If the bank won’t give your business a loan, then perhaps it will give you a personal loan.
Work With a Partner
One fast and easy way to fund your business is to find what real estate entrepreneurs call a ‘down payment partner’. You’ve got the idea, they’ve got the cash and they believe in your business. This strategy is also great when you’ve got bad credit and can’t get funding any other way. But be careful. Working with a partner can be tricky and you can lose control of your company if you share ownership. Make sure to work with someone you can trust, and put legal documentation in place to protect both of you in case it doesn’t work out.
Pre-Sell Your Products
One fantastic way to get an infusion of cash is to pre-sell your products (if you have products instead of or in addition to services). Once you have a working prototype, you can start creating agreements with retail stores and other customers and offer discounts for advance payment.
Get Organized and Be Resourceful
The best way to convince other people to lend you money or give you an advance is to have a great offering and a solid and actionable business plan to support it. Know the future of your company today and have confidence when sharing your imminent success with potential lenders and buyers. And remember that success is not always about how much funding you can find, but how resourceful you can be with what is available to you now.
Find Out More
One great place to do your homework on generating capital for your business is the Small Business Administration’s Web site. You will learn all about basic financing, loan programs and the pros and cons of equity capital. One interesting statistic shared on the SBA site about women with million-dollar businesses is that they ‘are less likely than their men counterparts to use credit and equity financing and are more likely to rely on the Internet and e-commerce to grow their businesses.’ To learn from expert women entrepreneurs on how to grow your business and succeed on the Internet, check out the Business Divas™ Audio Program here.
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Excelent tips!