1. Bootstrap Your Business
For those unfamiliar with the term ‘bootstrap’, this simply means to finance your business with your personal savings. The benefit of bootstrapping your business is that you do not have to give up any ownership or equity, which you would have to do if you were exploring angel investment opportunities. The downside of bootstrapping is that you will need to start producing revenue fairly quickly to keep funding the business on your own.
While this method contains some risks, it also holds a lot of potential benefits, so if bootstrapping is a possibility for you then by all means you should be considering it. However, if you do not have the means to bootstrap your business, there are still other attractive options for you to consider.
2. Apply for a Business Loan
As a small business owner, the idea of getting a loan can be daunting as there are so many options and a lot to consider. You want to get the best interest rates possible so that you are not struggling in the long run. When it comes to small business loans, one size does not fit all. To get the best deal for you, you should try to get matched with small business loan options online, that way you can get a better understanding of what financing options are available to you.
Depending on the urgency of your situation, if you can wait it out for a few months then you might be able to qualify for an SBA loan at a great rate. However, if you require funds immediately, you will be able to get a loan online but this comes with a higher interest rate.
3. Create a Crowdfunding Campaign
The other option available to you is to create a crowdfunding campaign to help you raise some capital. A crowdfunding campaign is when you ask a crowd of people to donate money to your business. There are many skeptics out there who think this is not a route worth exploring, however, there are plenty of success stories out there. For example, Formlabs raised an impressive $3 million on Kickstarter to help achieve their goal of creating affordable 3D printers for the general public.
Crowdfunding gives you the chance to connect with like-minded people with whom you may not have had the chance to network before. It also gives you a good opportunity to gauge interest in your business and whether or not people would realistically invest in your idea. If interest seems to be low, then this gives you a chance to tweak your business based on the feedback given to you.
4. Find an Angel Investor
An angel investor is an affluent individual who typically has a net worth exceeding $1 million or they earn $200,000 or more annually. They tend to work alone, however, there are occasions where they will team up with other angel investors on a project. Before pitching your idea to an angel investor you need to ensure that your business plan is solid and well-thought-out as they will have lots of questions and if you can’t answer them then you can forget about getting their investment.
You should consider your long-term intentions for your business as this will affect your decision as to whether or not you use an angel investor. For instance, if you plan to grow your business and then sell it, an angel investor is likely to be right for you. However, if you plan to grow your business and keep it running for as long as you can, then you should consider funding your business another way.
If you are wondering how to find angel investors, there are several directories and resources available that can help point you in the right direction, for instance, the Angel Capital Association.
5. Raise Money Through Friends, Family, and Other Contacts
Another way to raise the capital you need for your business is to seek funding from friends, family, or other contacts in your social network. The money can be in the form of a donation, loan, or exchange for equity. However, it is worth noting that sometimes accepting money from friends and family can be tricky as more emotions are involved.
To try and keep emotions to a minimum, you should approach your family with a business plan and a plan for strategic growth, this way they are well informed and they know exactly what their money is being used for. As with any funding process, there are risks associated with this, so it may be worth seeking legal advice to find a way to minimize the risk of fighting over money.
6. Venture Capitalists
For those unfamiliar with the term, a venture capitalist is a person who invests in business ventures by providing money to be used for startups or business expansion. Venture capitalists seek a higher rate of return than what would be expected in traditional investments. So you should only really be thinking about venture capitalists if you are planning for a very high growth strategy. If you do go down this road you need to ensure that your business pitch is water-tight, so ensure that you do your research and learn exactly what you need to prepare and include in your pitch deck.
Funding your business can be a tricky ordeal and sometimes it can take several different approaches and attempts before you find the right way. The key takeaway here is that you will have lots of options, so make sure that you invest the time into researching each of them so that you can give your business the best possible chance of succeeding.