9 Ways to Creatively Finance Your Small Business

You have a great business idea. You’ve done the research, drawn up a business plan, and chosen the perfect name for your company. Now comes the hard part; funding your startup. For many entrepreneurs, financing their new business is one of the most intimidating parts of the startup process. In fact, according to Entrepreneur.com, 79% of failed business owners cited “starting out with too little money” as one of the causes of their failure.

startup funding

Getting Non-Traditional Funding for Non-Traditional Businesses

Fortunately, you’re not the first entrepreneur to need capital to start their business. Keep reading to learn about innovative and successful ways to finance your business:

1) Friends and Family: If you have a relative or friend who may have spare cash, you might want to think about asking them to lend you some money to help start your business.

This is an attractive alternative to traditional lending as you may work out low or no interest repayment. Just be sure you can pay it back to avoid damaging your relationship.

2) Personal Financing: This may not seem very creative, but using your savings to start your business shows future investors that you are willing to “put your money where your mouth is.”

3) Microloans: In 1992, the United States Small Business Administration (SBA) introduced a program to help small business secure the financing they couldn't get from traditional lenders like banks.

Non-profit companies act as intermediaries and receive money from the SBA to lend to small businesses at relatively low interest rates.

4) Peer-to-Peer lending: This option uses the internet to find individuals interested in funding your business. A popular site is Prosper, where interested lenders bid on your loan. You choose the lender whose terms you find most agreeable.

Another social lending site is LendingClub, which uses a system based on credit ratings.

5) Crowdfunding: Crowdfunding is similar to peer-to-peer lending but instead of paying interest on the loan, you typically send investors a gift, such as the product they helped launch, or you give them equity share in the business.

6) Online Lenders: Online lending services such as Ondeck​ and Kabbage​ are a popular alternative to traditional bank lending since they offer speed and ease.

The application takes less than an hour to complete and a decision is forthcoming in only a few short days after which funds are dispersed.

7) Home Equity Loans: If you own your own home and have equity, a home equity loan can be a great way to finance your new venture.

Because the loan is secured, they generally have low and flexible interest rates, especially when compared with traditional commercial loans.

8) Credit Cards: Business credit cards are easy to apply for and receive, and offer a quick way to get your business up and running. You can pay only the minimum amount due until your cash flow gets moving.

9) Factoring: Invoice financing companies such as Fundbox​ will advance you the money to pay your bills, and you pay them back once your customers pay you. In essence, you are selling your accounts receivable to a third party, which allows you to bridge the gap between work billed to customers and payments to suppliers.

Now that you have an idea of where to find the funding, it's time to determine how much you need to borrow. Click this helpful guide about estimating your startup costs.

 

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