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Ways to Get Funds to Start Your Own Small Business
You officially want to start your own business. Starting your own business isn’t for the faint of heart. It can be extremely stressful and will demand your complete focus. However, it can also be a very fulfilling experience, even if the business does not ultimately succeed. One of the most important things to do when starting a business is to obtain funding. In today’s age, there are a variety of ways to get funding to start your own business. Each has its own advantages and disadvantages, and below are several ways of achieving this.
1. NASE Growth Grants
- NASE Growth Grants offer grants up to $4,000 for small businesses to help take businesses to the next level. Small business grants are useful for financing a particular small business need. Past recipients used their growth grants for computers, farm equipment, to hire part-time help, marketing materials, website creation, and many others.
- The NASE has already awarded more than $600,000 to NASE Members.
- Grants can be used for marketing, advertising, hiring employees, expanding facilities and other specific business needs.
- To be eligible for an NASE grant, an applicant must:
-- Be an NASE Member in good standing
-- Demonstrate a business need that could be fulfilled by the grant
-- Provide a detailed explanation of how you will use the grant proceeds
-- Show how the grant will improve your business growth and success
-- Offer supporting documentation such as a résumé and business plan
- For additional information, please visit the Growth Grants page on the NASE website.
2. Crowdfunding platforms (GoFundMe, Kickstarter)
- Crowdfunding platforms are becoming very popular and there are a variety of platforms to use. Some crowdfunding networks allow you to tap into your potential customer's pocketbooks without having a completely finished product and provide you the capital you need to finish it.
- You will have to do a lot of work behind the scenes and there is no guarantee you are going to get the funding you need. To attract investors from crowdfunding platforms, you will need to have a good story for your business and the use of the funds. Many businesses promise future benefits, such as first access to the future product. It’s a good idea to show your personal commitment to the business/product, and adding a video usually helps you obtain funding.
- It is also important to understand the rules of each platform. Some crowdfunding platforms hold funds collected until a certain goal has been raised. If the goal isn’t met, the funds may be returned to the donors. Also, the platforms usually take a cut of the money raised so you will need to take that into consideration.
- Overall, make sure you research the crowdfunding options that are available to you.
3. Peer to Peer Lending (Connect Lending, Lending Club, etc.):
- Peer-to-peer lending allows individuals or businesses through online services to match lenders directly with borrowers. In theory, since these services operate online they can run with lower overhead and pass the savings onto the lender and borrower. Borrowers can obtain financing cheaper than traditional banks. There are fees associated with this kind of borrowing and if you do not have great credit, the interest rates can be very high. Also, if you run into trouble it is typically harder to re-negotiate the terms of the loan as you may be dealing with an individual. As long as you find a lender (either an individual or an institution) that is willing to lend to you, you can obtain funding for your business very quickly.
- Online peer to peer lending has really taken off recently. While this option may provide you quick access to cash, you still have to be approved, and some online providers charge very high interest rates.
4. Local banks
- Banks and credit unions are one of the most common ways to get funding and have been around as long as lending has been around. Banks are typically more difficult to deal with when it comes to small business lending and you will need a solid business plan as well as a great credit score to obtain funding. Be prepared to fill out a lot of paper work and for the process to take considerable time.
- Credit unions can be easier to deal with, but they usually work with people that they have dealt with before. They like to work with people and businesses they know and understand.
- It is recommended to visit a bank or credit union that is familiar with you or your industry, or one that’s known for small-business lending. A bank or credit union will also want to see that you have contributed capital into the business as well.
5. Friends/Family
- Friends or family can be a great option for many individuals and businesses, but you need to be very careful when you mix money with friends and family. It is very important to be very clear about the terms and put everything in writing so no bad blood arises. Family and people's lives can be ruined if you are not 100% clear about the financial terms. On the positive side, if the business takes off, your friends and family can be along for the ride.
6. Other: Fund yourself through home equity loans or credit cards
- Home equity loans: If you have paid off a good portion of your home and have a good credit score, home equity loan may be a great option for you. You can get the funds rather quickly, and the rates are very good right now. Just remember your house is collateralized to the loan so if you default on the loan, the bank can repossess your house.
- Credit cards: Credit cards are a very easy way to obtain funding. You are already “approved” up to a certain amount, and you know what the interest rate is. On the downside, credit card rates are extremely high and you have to pay off the balance each month if you do not want to pay the high interest rates. Be very careful if you ultimately choose this route as you will want the business to quickly bring in cash so you can pay off your credit card debt quickly. Check out Bankrate.com and Credit.com for a list of cards with the lowest rates and best terms.
Overall
Always make sure you do your due diligence when evaluating your funding options. I always recommend inquiring and researching at least 3 options and weigh each against each other. That way you will know which funding option is the best for you. Good luck to you and I hope you get the best funding available to you.