Everything You Need to Know About Small Business Funding in 2018
Deciding to start your own business is a huge leap of faith, and it raises a lot of questions about small business funding.
You’re venturing into the great unknown filled with a lot of firsts, including:
- Writing a business plan
- Locating office space
- Requesting a business license
- Hiring employees
- Filing taxes
Every day you’re working hard to learn something new –
If you’ve never tried to line up funding for a small business, it can be a bit confusing sorting through the various options to find the right one for you.
We’ll walk you through some of the best options that banks have to offer, as well as a few alternative funding options you might not have considered.
Small Business Funding - Your Best Options in 2018
|Small Business |
|Small Business |
|Small Business |
|Time to Funding|
|Short-Term Business Loan||$2,500 - $250,000||14% APR and up||3 - 18 months||As little as 48 hours|
|Merchant Cash Advance||$2,500 - $250,000||1.14 - 1.18 factor rate||Deducted daily from merchant account||As little as 7 days|
|Invoice Financing||50 - 90% of total invoices outstanding||About 3% + %/week outstanding||When customer pays invoice, you receive remaining 10 -50% (minus factor fee)||As little as 24 hours|
|Term Loan||$25,000 - $500,000||7 - 30% APR||1 - 5 years||As little as 48 hours|
|Business Line of Credit||$10,000 - $1 million||7 - 25% APR||6 months - 5 years||As little as 48 hours|
|Equipment Financing||Up to 100% of equipment value||8 - 30% APR||Estimated life of equipment||As little as 48 hours|
|SBA Loans||$5,000 - $5 million||6 - 13%||5 - 25 years||As little as 30 days|
|Personal Loans for Business||Up to $100,000||4 - 36% APR||Up to 7 years||As little as 4 days|
|Working Capital Loans||$2,500 - $250,000||7% - 99% APR||3 - 18 months||As little as 48 hours|
Equity Financing vs. Debt Financing
There are two primary categories that most of your options will fall into:
Equity or debt.
What is Equity Financing?
Equity financing helps you secure capital in exchange for giving up partial ownership of your business and / or future profits.
Naturally, there are advantages and drawbacks to this type of funding.
On the one hand, your investors may want to have a say in how your business is run.
That means you might need to surrender some control over your business decisions.
But if you choose the right investors, you could gain access to more than cash.
Truly involved investors may become more like mentors with deep pockets:
Business-savvy benefactors that come with the right connections that can boost your business for years to come.
What is Debt Financing?
Funding through debt financing involves borrowing a set amount of money that you pay back over time, along with any interest that has accrued.
It’s just like to using a personal credit card, or taking out a loan for a car or a home.
You borrow surplus money from a lender, and they make money as you pay off the loan, with interest.
As long as you are able to make your payments, debt financing can be a good way to start a business if you don’t want to be beholden to investors.
There are several different types of debt funding options for small business, including alternative lending.
We’ll get into more detail on that a little bit later.
Just remember that while having several different types of loans to choose from might be intimidating, it’s also expands your options.
Debt and equity financing aren’t your only options when it comes to fundraising for your small business.
You could also try less traditional options, which we’ll go over in more detail a little later.
Just remember that no matter what line of business you are in, there is an option that is right for you.
Now let’s take a deeper dive into equity financing and debt financing.
In a nutshell, equity financing is when the business owner gives up a share or percentage stake of their business in exchange for cash or other capital.
An equity investor can be an individual, like an angel investor, or an organization, such as a capital investment firm, also commonly referred to as venture capitalists.
In the simplest terms – you are trading part of your business ownership away in exchange for the money you need to fund your business.
In many instances, investors do more than simply write a check to provide the working capital you need to fund your business.
They may also serve as a business mentor by:
- Providing advice
- Lining up additional mentors
- Connecting you with others in the business community
- Sharing their own experiences as a business owner
Since their own money is tied up in your business, they have a vested interest in seeing your business succeed –
You can trust that they’ll do what’s in their power to help you.
In return, they own a piece of your company.
It could be a little or a lot, depending on how much cash you needed to raise.
This means that every decision is no longer just up to you.
Sure, your investors probably aren’t going to argue with you about what type of letterhead you should use, but they may have strong opinions if you want to:
- Offer a new service.
- Double the amount of employees.
- Open a second location.
The decision to fund your business with equity financing should not be taken lightly.
While it may be tempting to accept a big stack of cash to get up and running more quickly, you need to decide if you are comfortable with the strings that come attached to this type of funding, and if you will be comfortable with the type of changes it could bring.
What is an Angel Investor?
No doubt you’ve heard of angel investors before, but who are they exactly – and why do they want to give you their money?
Put simply, angel investors are people with a lot of cash looking to grow their fortune.
Many of them are successful entrepreneurs themselves.
They choose to personally invest in startup businesses for many reasons, including:
- A desire help a fellow entrepreneur
- The opportunity to experience the excitement of working with a business just getting off the ground
- Or simply as a way to make more money
Some people become angel investors because they are looking for the next new thing, or are hoping to gamble on a startup that will help them make a quick buck.
Others choose to invest because they are philanthropists.
However, every angel investor is expecting to get some kind of return on their investment.
Angel investors may invest in one business – or several.
Those with more free time may enjoy the challenge that sitting on multiple boards brings.
Or they could simply be interested in the financial benefits of investing, and take a more hands-off approach with your business.
If you are contemplating taking on an angel investor, it’s important to find one that you think will be the right fit for your business.
Your Business & The Right Angel Investor
An angel investor can benefit a small business in many ways.
But despite their “heavenly” name, they don’t invest purely from the goodness of their hearts.
It’s also because they stand to get a lot back in return.
That’s why angel investors prefer to invest in companies in their early stages.
By investing in new businesses, they will typically receive more equity – and a greater chance for a bigger payout down the road.
While their cash can help get your business up and running, if you two aren’t on the same page, all of the advice, mentorship, and money they bring with them may not seem worth it.
That’s why it’s important to find an angel investor who aligns with your business goals and feels like the right cultural fit for your company.
Do your homework, and if possible interview multiple potential angel investors.
You want to find one who shares your vision, has the money and experience to help you succeed, and most importantly, is someone who you get along with. You want to partner with someone who will help you succeed –
Not battle you over the future of your company!
Remember, taking on an angel investor is more than gaining access to cash.
Instead, think of it as entering into a long-term partnership with a fellow entrepreneur.
And since their finances are now tied to those of your business, they are directly impacted by your success or failure.
This means if they think you’re about to screw up, they’re definitely going to speak their mind – whether you want to hear it or not.
Final Thoughts on Angel Investors
The right angel investor can truly help your business soar and benefit from his or her experience.
But the wrong angel can bring your business crashing to the ground.
When it comes to choosing an angel investor for small business funding, trust your instincts.
Funding via Venture Capital Firms
A venture capital firm is a business that is dedicated to investing in other businesses.
On the surface they are like angel investors because they provide financing for businesses in exchange for a percentage of your business, aka money for ownership.
Venture capital firms fund startups by purchasing a percentage of the startup’s business in what’s called a “round” of funding.
That means businesses are offering a certain amount of ownership in the business to several different venture capital firms in exchange for money.
If you are interested in venture capital as a business owner, it’s up to you to:
- Determine how much capital you need to raise
- Decide how much equity you are willing to part with in exchange for capital
- Pitch your business to multiple venture capital firms in the hope that you find one match (or more)
It can get a lot more complicated than that, but that should give you at least a basic understanding of how raising money with venture capital works.
Who Can Get Small Business Funding from Venture Capital Firms?
While the idea of lots of quick cash sounds appealing to many small business owners, not every business is a good fit for venture capital funding.
Not only that, it can be highly competitive when it comes to landing a venture capital firm as an investor.
Often several businesses are duking it out to catch the eye of a handful of successful venture capital firms.
Another drawback to this type of small business funding is that most venture capital firms are only interested in investing in businesses with the potential for fast, dramatic growth.
Most venture capital firms don’t make investments lower than one million dollars.
Venture capital firms are primarily looking for small businesses with dreams of growing big, fast.
So, if you’re only looking for an investment of $250,000, a venture capital firm probably is not going to be interested in you.
Another thing you should keep in mind is that a million dollars is a lot of equity in your company to trade away.
Really stop and think about how much control you’re willing to give up in exchange for money.
Small Business Funding with a Venture Capitalist – Final Thoughts
If your intention is to own a business that will remain small in scale, then you’re probably not a fit for venture capital funding.
However, if you’re planning for major growth and don’t mind giving up ownership and some say in the direction of your business, venture capital could be the right choice.
Working with angel investors and venture capitalists is all about building a relationship and working together toward the common goal of growing your business.
By contrast, debt financing is very straightforward.
You want money –
And lenders have it.
If you meet their lending guidelines, they’ll hand you some quick cash, and you walk away.
They don’t care how you run your business as long as you pay back the money.
Debt financing is money that you borrow with an agreement that you will pay it back, with interest, over a period of time.
You can use debt financing to borrow money from an individual, a lender, or a financial institution, like a bank.
It doesn’t come with the types of strings attached you get from an investor, such as giving up equity in your company.
But, you also don’t gain some of the intangibles that come from investors, such as the benefit of their experience and connections.
Small business owners can turn to debt financing when they need money to start and grow their business and either aren’t interested in working with investors, or don’t plan to grow large enough to catch their eye.
Debt Financing Offers Small Businesses Even More Options
Just like there is more than one type of equity financing, there are also several different types of debt financing.
In addition to traditional business loans, there are many other types of loan products available.
But they all share one thing in common –
You need to pay the money back of course!
Here’s a quick overview of some of the different debt financing options that are available to small business owners.
1) Term Loans
When you think about debt financing, a term loan is probably what springs to mind.
It’s one of the most common and straightforward types of business loans – you borrow a certain amount of money and pay it back for a fixed interest rate and term.
You’ll also need to explain to potential lenders why you want the loan, and how it will be used to fund or grow your business.
For example, lenders want to know that you aren’t simply asking for $50,000 because one day you decided it would be cool to start a cupcake shop.
They want to see that you have put a lot of thought and effort into your decision to start a business, and that you intend to pay the money back.
Essentially, they expect you to walk in with a business plan – not just rambling about how cupcakes are delicious and you just know you’ll easily sell a thousand a day!
Let’s say you do want to open a cupcake shop, and need to ask for a $50,000 loan.
You’ve done your homework, found a great location, and have several exciting recipes you’ve been testing on friends and family.
You’re confident that your business will be a success and you’ll be able to pay back the loan, along with the interest.
The lender agrees that you seem like a good risk and approves you for a 10-year loan at 11% interest.
Because you have 10 years to pay back the loan, you’ll most likely be looking at a monthly payment plan.
In this example, you’ll be making monthly payments of $688.75.
Before you sign on the dotted line to request the loan though, ask yourself if you will be able to afford to make those monthly payments.
Learn more about Understanding the True Cost of a Loan
If you aren’t sure, it’s probably better to either walk away, or ask yourself if you can get by with a smaller loan – one that will be easier to pay back.
Term loans are a popular choice for small business owners because they are straightforward, offer the convenience of predictable monthly payments, and can be used for a variety of business uses.
2) SBA Loans
The U.S. Small Business Administration (SBA) is a federal agency created to help give small business owners a leg up.
They are kind of like the fairy godmother of small businesses.
But instead of turning pumpkins into carriages, they help entrepreneurs fund their businesses and live out their dreams – no glass slipper necessary.
One way they do this is by helping business owners access small business funding, including long-term, low-cost loans.
While the SBA itself doesn’t lend money, it encourages lenders to make loans to small business owners – even if they are just starting out and don’t yet have a proven track record of success.
These types of loans are also typically lower risk, but yield higher rewards for the lenders.
Let’s take a look at the three main debt financing loan programs offered by the SBA.
7(a) Loan Program
Of all the options, the 7(a) Loan Program is the most common and flexible.
It also offers more open-ended terms and qualifications than other loan options.
Small business owners who request a 7(a) loan can borrow up to $5 million, which they can in turn use for a variety of business purposes, including:
- Startup costs.
- Purchasing equipment or real estate.
- Refinancing of higher-interest debt.
As we mentioned earlier, the SBA doesn’t offer loans. Instead, whether or not you are approved is up to an intermediary lender, but those funds are guaranteed by the SBA.
The ball is also in the lenders’ court to a certain extent when it comes to setting the terms of the loan, such as the total cost and interest rates.
However, SBA loans are usually some of the most affordable and longest-term types of debt financing available, other than a bank loan.
For more information, check out our article “SBA Loans: The Ultimate Guide to Government Lending.”
While 7(a) loans can be a great choice for businesses who need ready access to a lot of capital, not every small business owner is looking for a large loan.
Or they may simply be too new to qualify for much of a loan. Or perhaps they don’t meet the lenders’ lower limits.
To help businesses who need access to smaller amounts of cash, the SBA’s microlending program can be just the ticket.
This program provides lending opportunities for entrepreneurs and solopreneurs in amounts ranging from $500 up to $50,000 – although the typical microloan averages out to be around $13,000.
Microloans were created to help small businesses who have little to no business credit history, and who have never received a bank loan before.
As is the case with the 7(a) loans, the eligibility standards and rates are guided by the SBA, but the intermediary lenders have final say over what the terms will be.
CDC / 504 Loan Programs
For businesses that are well established and want a loan for a specific purchase, such as renovating a building, purchasing a large piece of equipment, or land improvements, the SBA’s CDC / 504 loan can be the best choice.
It doesn’t offer the same flexibility that a 7(a) loan does, but it’s usually more affordable.
Business owners can borrow up to $5 million and take up to 20 years to make payments.
Interest rates are based on the current treasury rates.
There is one major drawback – off all the SBA loans, CDC / 504 is the most regulated.
This means that only small businesses that are well-established and have a solid credit history can qualify.
3) Business Line of Credit
Let’s move on from term loans to explore another debt financing option for small business owners – a business line of credit.
A line of credit functions much like a business credit card by giving you capital that you can draw upon as needed.
This means that you have a fixed amount of capital that you can tap into when you need it.
Even better, you only pay interest on the money you actually use.
For example, if you have a $10,000 line of credit but only draw $5,000, that is what you will pay interest on – not the full amount.
You also still have that other $5,000 available in case you need it.
Once you pay back the initial $5,000 you withdrew, you have access to the full $10,000 again.
For that reason, a business line of credit is often referred to as rotating credit.
Small business owners use a line of credit for a variety of reasons, including:
- Purchasing inventory.
- Dealing with the seasonal drops in cash flow.
- Paying off other outstanding debts.
- Buying business equipment.
You never known when an unexpected expense might come up.
The ability to withdraw money when its needed, and not pay interest on money that isn’t needed, makes the business line of credit a popular choice for many business owners.
4) Equipment Financing
We’ve already talked about tapping into different methods of small business funding to purchase things like business equipment.
But did you know there is actually a loan specifically created for this purpose?
Requesting an equipment financing loan is relatively fast and painless, and it can help you quickly obtain the money you need to buy equipment for your business, such as:
Equipment loans are a type of financing known as asset-based.
This means you need to have collateral in order to qualify for the loan.
This is in contrast to the other types of loans and lines of credit, which are more reliant on your credit history and business finances.
A business equipment loan acts much like a vehicle loan.
This means the equipment you purchase acts as collateral, the same way your car does in the case of a vehicle loan.
This also means you are more likely to be approved without having to offer a separate form of collateral as you might in other types of collateral loans.
Perfect credit isn’t required to qualify for an equipment financing loan.
That’s because you’re putting up a piece of collateral (the equipment you’re buying) to back up the loan.
As a result, lenders tend to be less interested in the specific financials of your business.
5) Invoice Financing
One of the biggest problems in small business is managing cash flow.
Let’s say you bill clients once a project is complete, or a pallet of goods is shipped.
At that point, you expect to get paid.
The problem is not all of your customers are great about paying on time.
In fact, some are downright terrible.
If you have fallen victim to late payments, invoice financing is one of the best ways to get your cash flow under control.
Invoice financing, also known as accounts receivables financing, is a system that allows companies to purchase your accounts receivable through a cash advance equivalent to about 80 percent of your invoices’ value.
Later, you will receive most of the additional cash you’re still owed, proportional to the amount of your outstanding invoices that actually get paid.
Late payments can be crippling for many small businesses.
After all, you have your own bills to pay, and your utility company doesn’t care that none of your customers have paid you yet – they still want their money.
It may even cause you to be unable to make payroll, which could prove disastrous.
Tracking down late-paying customers is a real headache, and takes up valuable time you don’t have.
That’s why many small business owners turn to invoice financing.
It allows you to get invoices paid fast, not two months from now.
Depending on the number of late-paying clients you have, it could be well worth the small amount it costs your business to take advantage of this type of financing.
Merchant Cash Advance
For business owners that need some quick cash a merchant cash advance can help – but it comes with a steep price.
While it’s one of the fastest types of debt financing available, it’s also one of the most expensive.
A merchant cash advance gives a business owner a lump sum of money in exchange for a percentage of the company’s future credit card sales.
This means that every time you make a sale, the lender gets a cut.
When you sign up for this type of funding, you are allowing the lender to take a certain percentage of each day’s sales, plus a fee.
That means if you have a slow day, you don’t have to worry about handing over too much of that day’s tiny haul.
But if you have an amazing day (or week), then so does your lender –
Since they are getting a piece of the action.
Merchant cash advances are a good way to get your hands on some money if you are in urgent need, but it’s also one of the most expensive types of small business funding available, and not a good long-term solution.
The types of businesses that gravitate toward these types of loans tend to either have bad credit, cash flow issues, or just lack the time or energy to go a more traditional loan route.
However, a merchant cash advance can be a good fit for seasonal business owners who want to minimize payments during their slow season.
Equity Financing vs. Debt Financing: Which is Best?
We’ve gone over a lot of information regarding the two primary types of small business funding.
Here’s a quick recap of each, including some of the pros and cons.
Equity investors are looking for a pretty substantial return on their investment.
This means when they invest money, it’s not in increments of $5,000 or $10,000.
Angel investors typically won’t get involved with a business unless they are spending at least six figures to fund a project.
For venture capital firms, it’s even higher.
Most venture capitalists won’t invest in a startup unless their buy-in is at least a million dollars.
If you have big dreams and need a lot of money, fast, equity financing could be for you.
However, if you need a more modest amount of capital to grow your business, then you might want to consider other small business funding options, like debt financing.
If you don’t want to give up a stake in your company, or you don’t need a large amount of cash, debt financing is a solid choice.
For one, it offers a lot of flexibility.
You could borrow $1,000 or $100,000.
Once you know exactly how much money you need to borrow, you can start to narrow your options and pick the right type of debt financing for you.
For example, the SBA microloan program is designed for businesses that are seeking to raise less than $50,000 in capital.
The SBA also encourages lenders to make loans to businesses that are owned by women or minorities.
Related Reading: Minority Business Loans – Discover 36 Opportunities Here
If you have bigger financial needs, the SBA’s CDC / 504 program offers loans of up to $5 million.
Other less traditional options include:
It’s a lot to consider, so you may want to spend some time researching the business funding options that sound like the best fit for your business.
Before talking to any potential lenders, you should also know exactly how much you need to borrow, and how much you can afford to make in payments.
Equity financing and debt financing are two very popular ways to obtain small business funding –
But they aren’t the only options.
Let’s take a look at some other ways you can go about raising money to finance your business.
1) Friends & Family
The people who are closest to you in your life are your friends or family.
If you’re going to turn to anyone for support in times of need, it’s them.
So, it might make sense if you’re struggling with financing to tap into your personal network for some help.
On the upside, someone who cares about you is probably not going to charge you the same high interest rates that a bank or credit card would.
In fact, they might not charge you any interest at all.
However, borrowing and lending money among close friends or family members can be incredibly stressful.
It could put a strain on your relationship if you are late on paying back the loan –
Or if the business fails and you are never able to pay it back.
Before you pass the hat among your inner circle, ask yourself if you are confident you will be able to pay these people back.
You should have an open and honest conversation about the risk involved before they agree to part with their money –
And you agree to borrow it.
Your loved ones are putting a lot of faith and trust in you.
If you flake out on repaying your debt to them it could cause permanent harm to your relationship.
You should also be prepared for a potential undercurrent of stress should it take you longer than you expect to pay them back.
If things go really bad, you may even find yourself facing off in court.
To avoid these types of problems, establish clear terms for what form the loan will take, including re-payment terms and timelines.
Then get it in writing.
You may even want to get it notarized, or have a lawyer review it before you both sign off.
Maybe instead of giving you a loan, a family member or friend has agreed to act as an investor in your business.
Just as you would for a loan, be sure you clarify what they are getting in exchange for their money –
Such as profit shares, a certain percentage of ownership, etc.
Also be clear if they are going to have a say in the direction of the company, or act more as a silent partner.
If you are fortunate enough to have a friend or family member willing and able to help provide funding, treat them with gratitude and courtesy.
2) Taking it to the People with Crowdfunding
The internet has made it incredibly easy to raise funds online through what’s known as crowdfunding.
Initially the domain of charities, crowdsourcing has spread as a way for entrepreneurs to fund their passion project, be it an indie film, or a record store.
But you don’t need to be a hipster to crowdfund your business.
You just need to set up your website, write some compelling copy explaining your vision, maybe upload a video, and voilà, you’re ready to raise some cash.
If you’re not familiar with crowdsourcing, here’s a quick primer:
- You set up your crowdfunding page, and pick a goal of how much money you need to raise
- You promote your page to your friends and family, professional connections, on social media, etc., to help spread the word and raise awareness for your campaign
- People donate. It could be a little or a lot, but every bit raised goes towards your business – as long as you reach your fundraising goal
Take some time working on your messaging for your crowdfunding page.
Remember, a lot of potential donors won’t know you.
You want to write about your dream in a way that can get even strangers excited about this amazing business you are creating.
Let them know how passionate you are about your idea, and explain how it will personally benefit them – the donor.
For example, if you want to start a restaurant, talk about why you chose a particular location, what type of food you will be serving, the atmosphere you want to create, etc.
You want potential donors to be practically salivating as they imagine themselves sitting down for a meal at your would-be restaurant.
Kickstarter and IndieGoGo are two of the most popular crowdsourcing platforms.
Spend some time poking around on them and you will quickly get an idea of how crowdfunding works if you don’t already know.
While crowdfunding sounds great in theory – you set up a website and people just give you money – of course it can be a lot more complicated.
After all, you are basically asking strangers to give you their money to fund your dream.
While some might simply do it because they believe in what you are doing, for others it goes a long way if there’s also something in it for them.
That’s where incentives come in.
Incentives are generally set up on a tiered system.
For example, if you’re opening a barcade they could look something like this:
- $10 donation: a thank you email.
- $25 donation: a bumper sticker.
- $100 donation: a t-shirt.
- $250 donation: an invite to your opening night party.
- $500 donation: unlimited play on arcade games for one year.
Keep in mind if you go with incentives that you’ll need to spend money purchasing things like stickers and t-shirts, so be sure to build that into your budget –
And potentially your crowdsourcing goal.
It’s also important to remember that crowdsourcing isn’t a good fit for every type of business.
For example, you could be in for an uphill battle if you are trying to crowdfund, say, an accounting firm.
However, if you have a catchy idea, and are good at marketing and self-promotion, it could be the perfect way to raise funds without taking on debt or giving up a stake in your company.
It’s also a good way to raise money for an existing business.
For example, if you operate a bowling alley and are so popular your customers struggle to book a lane on popular nights, they might be more than happy to chip in to help you raise the money you need to expand.
Don’t underestimate your customers’ loyalty to your business.
If you share with them what you are trying to achieve, they may come through in ways you can’t even imagine, like holding bake sales, etc., to help you achieve your dream.
Worth noting: Most crowdfunding platforms follow the all-or-nothing approach.
Meaning, if you don’t reach your fundraising goal you don’t receive any cash. It all goes back to the donors.
So, when you are setting your goals be realistic, or you might end up with nothing.
No matter what your ultimate goal is for your business, your funding options will still be dictated by your current financial circumstances.
For example, if you have a spotty personal and business credit history, debt financing may be challenging for you.
At the moment, you may only qualify for low-dollar, high-interest rate loans.
If you want to take out a large long-term goal, that may simply be something you need to build toward by first establishing your creditworthiness with smaller, short-term loans.
Learn more about How to Get Small Business Funding with Bad Credit
How to Get Funding Fast
If you need quick access to cash, you may not be able to be as picky as you’d like when it comes to your financing options.
It will simply be a matter of whichever lender can get you the money you need as quickly as possible, even if the terms are less than ideal.
If you need money in a hurry, that will eliminate several equity financing options, since they often have a lengthy vetting process.
An SBA or traditional bank loan is also probably out due to the time required for approvals.
Crowdfunding campaigns can be helpful, but often take a month or two to get set up and raise the necessary funds, so they are also not a good option for business owners who need a fast cash.
In cases like this, your best bet is likely financing from friends and family, or a merchant cash advance.
Learn more about How to Get Small Business Funding FAST
Choosing Long-Term Goals and Planning for the Future
Before you commit to what type of funding option is the best for your business you should really step back and think about what your vision is for your business.
Emergencies will come up now and again that might require you to secure funding in a pinch, but ideally every dollar you borrow should be leading you toward that vision.
And don’t just think about how much money you need to get through the next few months, or even the next year.
Instead, look at the bigger picture and think about where you want your business to be in 20 years (or even further) down the road.
Some things to consider include:
- Who are your competitors?
- Where will your opportunities for growth come from?
- What challenges do you foresee?
- Do you plan to eventually sell your business, or hand it down to a family member?
By looking further ahead you can begin to come up with a business strategy that may lead you toward larger, more long-term funding goals for your business.
Don’t Forget You Need More Than Just Financial Support
That old saying that it takes a village to raise a child holds true in business as well.
Starting or growing your business takes more than just an infusion of cash.
You’ll need other types of support along the way to help you succeed.
For example, if you have taken on an angel investor or venture capital firm, they will help you in other non-financial ways through mentoring, and sharing the knowledge they’ve gleaned from working in the business world themselves.
Don’t forget, they own a piece of your business, so they want your business to be as successful as possible.
If you opt to go the crowdfunding route, people who donated will likely feel a strong connection to your business.
They will probably be some of your best customers and biggest cheerleaders, so be sure to let them know how important they are to you and your business.
They can help you grow bigger and faster than you might imagine.
Only You Know What’s Best for Your Business
There is no one answer to the question, “What type of funding do I need for my business?”
That’s because the answer is different for everyone and depends on several factors.
We hope that this article has given you a solid overview of the types of small business funding that may be available to you, as well as the types of resources available to help you fund your business now, as well as in the future.
When you’re ready, we’ll be here to help you start the process of connecting with a lender in one convenient place!