You’ve finally decided to take the jump and open your own small business. The excitement is overwhelming, but you know you’re ready. The only thing is, you don’t exactly know where to start with funding. The ideal way would be to fund it completely out of pocket, but if that’s not possible for you (don’t worry—it’s not possible for most!), what do you do? Do you crowd source the money? Do you apply for loans? What type of loan can you apply for? Are there any grants available to help save you from taking out too many loans?
There are a lot of options for you when it comes to funding your small business. At the same time, there are some options you should avoid. We’re here to help you understand what resources are available to you so you can make a well-informed decision on how to fund your business.
How Do I Fund My Small Business With No Money?
Advantages of Angel Investors
How to Pitch to an Angel Investor
Disadvantages of Angel Investors
If you like to have a tight grip on the vision of your business, it’s also important that you do your due diligence with your investor just as they do with you—the best angel investor relationships with business owners are built on trust, similar schedules, and an overall shared vision of the business. Remember that if you’re going to give someone a 33% stake in your business, they'll get $1 out of every $3 that you make—it adds up! Be sure that it’s worth it.
Equity crowdfunding platforms are meant to help you raise capital through selling equity. Recent changes in securities laws are making it possible to sell shares through this sort of platform with hosts like Gust and AngelList.
Grants for Research and Development
Grants for Exporting
Grants For Other Uses
The federal government offers grants to nonprofits, educational institutions, and state and local governments. Sometimes, nonprofits and state or local governments offer economic development grants directly to small businesses, so check with your local and state governments for opportunities, or visit grants.gov to search for grants that apply to your business.
Small Business Loans
Mistakes to Avoid When Applying for Small Business Loans
Lenders will likely look at missed payments as a sign that you’re untrustworthy; if you can’t pay your current bills, why would you pay a new bill from them? Get a head start and avoid missing payments on any credit cards, vendor accounts, or any other accounts that report to personal or business credit reporting agencies.
Lacking a Plan
Not all lenders require a business plan, but it’s good to have one in place just in case. It’s also a good move for you as an owner, and it will help you identify next steps in your growth strategy. If you don’t have an idea of what the future of your business looks like, take a few steps back and figure that out first. You should consider future expenses and avenues for growth to help keep your cash flow high and your risks low.
Applying for a Lot of Loans
They say you catch more fish by throwing out a bigger net. But we’re accountants, not fisher-people! So we’ll follow that up by saying that in some rare cases, applying for a lot of loans may be a good idea, but we suggest limiting your loan applications unless directed to do so by a lender or financial professional.
Click below to speak with a Botkeeper representative about how automated bookkeeping can help you grow your business no matter where you’re at in the funding process.