Funding a business has a lot of little nuances that many new business owners, or those interested in starting a business don’t know. Owning your business is certainly rewarding, but without funding to get you through the startup stages, you may need to close the doors before you can even get going. In fact, running out of cash is the second most common reason why startups fail, according to CB Insights.
Luckily, funding isn’t so elusive. If you have the direction and determination, you could find funding easier than might think. We compiled a list of a few ways to fund your business and grow it into a successful company. Let’s dive in!
1. Check Out Bank Statement Loans
When you need a quick surge of cash to cover an unexpected expense for your new business, or if an opportunity to grow presents itself, a business bank statement loan may be right for your business. The only catch is that you need your business to be in good financial shape, showing a steady flow of profit coming into your business bank account each month.
To get funding this way, you’ll also need to have your paperwork in order and meet a few qualifiers from the lender. For instance, you need to be self-employed for at least two years. If you meet the requirements, this is certainly an appealing option for business owners.
2. Keep Bootstrapping Your Business
This may seem like the complete opposite of getting funding, but it simply depends on how you are bootstrapping. Chances are you are already bootstrapping your business and need a bit more money to grow. Did you know over 80 percent of businesses are self-funded? Before you go for large amounts of funding, consider cutting back on certain expenses first.
This can free up cash flow in order to achieve what needs to get done. Another way to free up more cash and skip high interest rate loans is to simply pay yourself less. It is pretty amazing how many business owners divert too much to themselves while still trying to grow their businesses. Be smart, cut back, and you can fund yourself.
3. Go The Private Lender Route
Private lenders are simply people that believe in your business and you. They are willing to fund your business based on your idea and passion. Plus, private investors are low maintenance as well. Most are hands off and not interested in quick returns on their investment.
But make no mistake, you will still need to pitch private investors and show your expenses and a projection of profits. Do your homework and grow your network on LinkedIn to find a private investor that will be a good fit. Private investors are also great to lean on, similar to mentors.
4. Considering Venture Capitalist Funding
Venture capitalist or VC funding is the holy grail of funding. Most of the time, you will need to have already proved your business theory and have some enticing results to show VCs before getting funding. This funding route is perfect for businesses having early success, but can’t afford to develop technology that would increase profits exponentially.
Getting VC funding, however, is not always the best. VC firms often want a quick turnaround on their investment and are not as hands off as private investors. Think of them as a board of directors. You may need to give up some equity in your company going the VC route as well.
5. Angel Investors are Always Great to Consider
When looking for business funding, angel investors are often a good option. They are in-between private investors and VCs. Securing funding from angels will take some work, but you will not have as much pressure to grow as fast as in the case of venture capitalist funding.
Another benefit of going the angel investor route is that you generally are not asking for a large sum of funds. “The typical angel investment is $25,000 to $100,000 a company, but can go higher,” Richard Harroch explained in a Forbes article. This is great if you only need a smaller amount of money to accelorate growth.
6. There are Always Credit Cards
If you simply don’t want to hunt down investors, there are always business credit cards to help fund your expansion or to cover unforeseen expenses during seasonal shifts. Just be careful, since credit cards come with high interest rates. The best way to go about this type of funding is to talk to a representative at your bank.
Wrapping up . . .
There are a lot of different ways to fund your business in those early years. The above are only the tip of the iceberg. It all boils down to what makes sense for your business at that moment.
