As a small business owner, securing capital to run your small business is always going to be one of your biggest challenges. Depending on your personal circumstances and the history behind your business, securing financing from a bank might not always be a viable option. With that said, there’s no need for concern. There are in fact many ways you can secure business financing without pleading with your bank.
From the discussion below, you will learn about business financing options that are available for people with your given circumstances. Here’s a list of options worthy of your consideration:
- Venture Capitalists
- Angel Investors
- Internet Borrowing and Credit Cards
If you are starting a new business or are looking to expand an existing business, you might have something that appeals to venture capitalists. Venture capitalists are groups that provide capital to small business owners in exchange for an ownership percentage in the business. In most cases, the numbers are negotiable.
While securing capital is the main reason you would bring in venture capitalists, these are people and groups with vast amounts of business experience. With a vested interest in your success, they might well be willing to give you help and advice along the way.
Any notion that venture capitalists and angel investors are the same would be a little misguided. While venture capitalists are usually looking to invest in more secure and sometimes established businesses, angel investors are usually willing to offer capital based on nothing more than a concept or business plan. They are willing to accept more risk that the business might not succeed, but often want a little higher percentage of the business in return.
Again, most angel investors are experienced business people who will sometimes make themselves available for advice and sometimes guidance.
If your company is generating revenue, you most likely are invoicing your customers and often times awaiting payment based on established terms. If you have a viable accounts receivable process in place, you might be able to convert the future cash flow from your outstanding invoices into collateral for immediate cash. This is known as factoring.
“While this is a solid way to create much-needed cash flow”, says Eyal Nachum from Brüc + Bond, “the portion of your invoices that you will pay to the factor in exchange for the capital could be rather high if there’s risk in the invoice collection process”.
While the other capital raising options listed above have been around for a long time, crowdfunding is a relatively new way to raise capital. The process is usually handled through a website such as Kickstarter and Indiegogo. While crowdfunding has often been used to raise donations, the process still works for businesses in the form of equity funding.
As a business owner, you would be reaching out to a large group of people who might be willing to invest small amounts of money in your business venture. In the proposal you list on the crowdfunding site, you would provide details about the business and what you are offering to investors in return for capital. If you use a crowdfunding platform, you may be required to pay fees for access to the platform and potential investors.
A lot of successful business owners are generous and more than happy to pay their success forward. Depending on the scope of your business venture and the industry you will operate within, you might be able to qualify for a business grant from an individual, endowment, charitable organization, government agency or company that offers support to new entrepreneurs.
Internet Borrowing and Credit Cards
If you or your business have significant debt/credit issues, it can be very difficult to convince others to invest in your business. While the terms and conditions can be quite restrictive, there are internet small business lenders that might be able to offer you a borrowing solution. This might not be the optimum way to raise capital, but in a pinch, it is an option. If you can qualify for high-interest rate credit cards, that would fall into this area as well.
When traditional borrowing options for your small business are not available, your business needs you to get creative. Hopefully, you’ll find some value in considering some of the capital raising options listed above.