By Bert Seither, Vice President at 1800Accountant
About the author: Bert Seither is the Vice President at 1800Accountant, the nation’s leading accounting and consulting firm for small businesses and entrepreneurs. For over a decade, Seither has assisted thousands of small business owners by helping them achieve financial freedom.
In order to launch a small business that has a very good chance of being financially successful, it’s an absolute must to build a solid financial foundation around it from the beginning. The good news is that there are several strategies financially-strapped entrepreneurs can use to get funding for their enterprises. Consider these options:
1. Using money from your personal bank account
If you currently have a substantial amount of money sitting in your personal bank account, you should seriously consider taking out a reasonable portion of it to put toward the startup costs incurred in launching your business. In fact, this is a necessity for many entrepreneurs while waiting for some revenue to roll in. Since you have the most control over this particular funding strategy, take full advantage of it. Just be sure not to dip too deeply into your retirement savings accounts. Plus, it’s also worth reaching out to family members and friends to see if someone could lend you some money that you could pay back to them in the future.
2. Acquiring a small business loan
Acquiring a small business loan comes in various forms. Regular bank loans are a common option to acquire funding that you can pay back over time. As for small startup companies, microloans that come in smaller amounts can be an effective option. In order to get approved for a business loan, you must have a viable business plan that includes reasonable profit projections. A loan application that points to high debt, low equity, or unsubstantiated projections on profits would be much less likely to receive a stamp of approval from a lender.
3. Getting business equity
Obtaining funding for a small business via the equity route can occur when business owners receive an agreed-upon amount of capital in exchange for an equity ownership stake in the owner’s business. Angel investors and venture capitalists are among those who are highly involved in equity funding for startups. In order to acquire equity funding, small business owners must have a very workable business plan on paper, along with good credit. Entrepreneurs can have an even better advantage in obtaining it if their business plans suggest solid profit projections and a high expected return on investment (ROI).
4. Government funding/grants
The government offers a wide array of funding opportunities to small businesses and startups in all industries. Government grants for brand new business enterprises and non-profit organizations doing work for a good cause are readily available in many cases. In addition, the federal Small Business Administration offers loan options. Be sure to consider every level of government when seeking funding – local, state, and federal agencies. In general, the key to obtaining this funding is to develop an effective and persuasive business plan because all government agencies are more likely to fund endeavors that are most deserving of it. In terms of government grants, consider finding an experienced grant writer to assemble a highly specified proposal for you.
5. Try your hand at crowdfunding
Thanks to the Internet, crowdfunding is a relatively new and innovative capital-raising method for entrepreneurs. They utilize various websites through which they can “broadcast” their business ideas and see if any investors around the world will offer funding to them. Crowdfunding can help you generate just a few hundred dollars up to hundreds of thousands of dollars in capital, based on the financial willingness of investors to take a chance on your idea. The biggest perk involved in crowdfunding is the ability to reach a global pool of potential investors, which is essentially impossible through every other funding option.