Guest Post by Rae Steinbach
No matter how sound your small business idea and planning seems, funding is still a crucial element of growth and success in both the short- and long-term. Increased cash flow makes it easy to invest in your business, whether that means office space, a new website, or anything else.
With so many different options available in terms of small business funding, owners need to be sure they pay attention to what each has to offer. However, it can be tough to know how to make the right choice for your company. These are some of the best ways to start looking for the necessary funding required to grow your business.
Start with Personal Cash
Different types of businesses have different financial needs, but you may be able to go a long way simply by using your own money. This could be anything from home equity to credit cards or savings accounts depending on your own financial situation.
While it can be risky to invest too much of your own cash in a business, this strategy offers the important advantage of not owing anyone else money or having to make payments on loans.
Personal funds, on the other hand, might not be enough to cover all your business expenses if you’re trying to scale quickly. At this point, you’ll need to look in new directions for additional sources of funding.
Ask Family and Friends
It can be intimidating to start asking people close to you for investment in your own business, but this is often the most effective next step after putting your own money forward. Remember that the worst they can do is say no, and small contributions can add up quickly if you have a large number of investors.
No matter who you’re asking for money, you’ll need a detailed business plan explaining why your company is in a position to succeed and why you need their investment. You should also let them know what to expect regarding the eventual return of their investment.
Crowdfunding is a relatively recent investment opportunity, yet it was already responsible for over $700 billion raised in the US alone throughout 2016. Websites like IndieGoGo and Kickstarter make it easy to pitch your idea and ask individual investors for contributions.
These options generally target businesses with an emphasis on community involvement, and there are important things to consider before pursuing a crowdfunding investment. That said, many companies have had success with crowdfunding, and some campaigns have even gone viral.
Business loans come in a variety of forms, and it’s important to understand the pros and cons of each choice. Furthermore, different lenders sometimes offer very different terms from each other, so it’s important to do thorough research before making a final decision.
Fortunately, some lenders are committed to supporting small businesses, and you may be able to find favorable loan terms if you check with different banks. Like any investment option, they’ll expect a clear picture of what your business does and what you plan to do with the money.
Venture capital can be harder to access than some of the other choices on this list, but it’s one of your best options if you’re looking for large investment (think $1 million or above). The requirement for a strong and detailed business plan is even more important when dealing with such large quantities of cash, so you’ll need to be ready to explain why you need the investment.
The best way to start looking for venture capital investment is to start talking to some of your contacts and seeing if they can offer more information. While this option is more likely to succeed than a simple cold call, the National Venture Capital Association website also provides a directory for businesses looking for investment.
Securing funding is one of the most important things you can do for your small business’s future, and the decisions you make early on can have a major impact on your long-term outlook. These are a few of the best options for investment and a great place to start for any small business owner.
About the Author, Rae Steinbach
Rae is a graduate of Tufts University with a combined International Relations and Chinese degree. After spending time living and working abroad in China, she returned to NYC to pursue her career and continue curating quality content. Rae is passionate about travel, food, and writing.