As many entrepreneurs discover, raising money to fund a small business can be an undaunting task. Unless one has built a line of credit with their bank already, it can be rather difficult getting a loan. Fortunately, new options for small business owners on a money hunt are fast evolving. Here are five money sources that first-time entrepreneurs often overlook.
1) Crowdfunding platforms - Kickstarter, Indiegogo and the like offer a way to go directly to the masses and solicit funding. You’ve probably heard how they work: you make your pitch and post it on the platform, and people can contribute toward your fundraising goal. In some cases, you can keep the money you raise even if you don’t make your goal; with others, it’s all or nothing. The downside of these platforms is that the transaction cost can be quite steep, ranging from 5-10% of the amount raised. Unless your business is easily understood by consumers and has a sexy story, you might be better off pursuing other options.
2) Payday Advance Loans
You can also take out pay day advances on your paycheck from multiple lenders at once if you're confident you will see a return. This can give you a small chunk of capital all at once. Be sure you properly look at your budget to be sure you can make your payments and still have money to live on.
3) Personal Assets - You can sell your personal assets if you are confident enough in your business, you can basically get rid of anything you believe you can just get back. LetGo is a free, person-to-person, mobile classifieds app, which launched in 2015. It allows users to buy from, sell to and chat with others locally. You can easily post any items that you are willing to part ways with to get immediate cash. Just take pics of your items, post them on the app and other users may begin a conversation with you by using the chat platform within the app. The great thing is that you don't need to exchange personal information and can meet at a mutually designated public place for safety.
4) Small Business Loans
If you need a significant amount of capital to fund your business, a small business loan can provide hundreds of thousands of dollars at a relatively low interest rate. You might find yourself borrowing money you don’t need, but all things considered, a small business loan is one of the less expensive ways to secure funding. If you go this route, consider a credit union or community lender instead of a big, nationwide bank. The former group approves around 50% of applications, while the latter approves just 17%.
Finally, you can take advantage of grants from nonprofits and government alike. High-tech, high-impact and high-growth businesses can be eligible for the Small Business Innovation Research Program, which funds R&D projects; certain up-and-coming cities like Columbus and Philadelphia offer incentives to startups based there. You can also consider partnering with a university to increase your chances of being eligible. Check Grants.gov to see what you qualify for.
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