Most owners of small businesses realize that at some point they will require additional financing to spur continuing growth. To accomplish this, they need to put together a plan to strategically grow their business. A financial forecast will assist them in determining how much business funding they need. Here are some of the best methods for acquiring financing for your company.
Obtain a Bank Loan
Applying for a loan from a bank or credit union is typically one of the first steps owners take in securing business funding. The lending institution stipulates the interest rate and schedule for repayment. You will also need to put up some sort of collateral as security for your loan. Loans backed by the U.S. Small Business Administration are particularly desirable; consider working with the local Small Business Development Center to obtain an SBA loan.
Bootstrap Your Business
The advantage of bootstrapping, or self-financing, your business is that you retain complete ownership or equity. This may involve taking out a personal loan, using your own savings, obtaining a line of credit, or using credit cards.
Receive Funding from Family and Friends
Assistance from family and friends may be in the form of loans or exchange for equity in your company. If you decide to go this route, have a business plan ready so you can demonstrate your professionalism, and take the step of setting up a legal business arrangement to preclude infighting.
Approach Angel Investors or Venture Capitalists
Angel investors and venture capitalists are individuals who provide funding for startups or companies seeking to expand. Before you agree to work with these investors, find out if your business plan matches their strategies and what they expect to receive in return.
Solicit Contributions Through Crowdfunding
Online crowdfunding sites allow you to solicit donations from numerous individuals. In exchange, you offer rewards to the people who assist you with business funding. Be aware that crowdfunding sites differ in their requirements for obtaining financing, so carefully compare the various options first.
For more advice on business funding, contact Sterling Capital Consulting.