Small businesses and startups receive funding from sources other than brick and mortar banks for myriad reasons. Some people can’t qualify for loans; others prefer receiving equity rather than going into debt. Whether you don’t want a bank loan or can’t get one, that doesn’t mean your idea will never become a startup or small business. Funding opportunities are all around you.
Setting up crowdfunding opportunities on sites like Kickstarter is a great opportunity to ask lots of people to invest money in your idea. You need to know a couple things before you start. First, read all the fine print on each crowdfunding site to make sure you’re picking the best opportunity for your business. Second, develop a marketing plan. You have to get the word out about your business and the crowdfunding, or nobody will ever know they want to send money.
An angel investor is someone with money looking for a startup in which to invest. In exchange for the capital, you give the angel investor a piece of equity in your company and the chance for a huge return on their investment. Angel investors don’t give you money just because you ask for it. You need to attract them with proof that you’re a good investment, including a good business plan. Forbes has more information on what angel investors look for in their startup investments.
A brick and mortar bank isn’t the only place you can go for a loan. Online loan companies specializing in small businesses and startups may provide the financing opportunities you’re looking for. The interest rate is higher, but for people with bad credit or who couldn’t get approved by a traditional bank, an online loan might be your best option. Plus, the process is much faster. You can get approved in a shorter time period, partly because the online process means information travels between you and the lender much more quickly.
Friends and Family
Your friends and family are possible investment sources scattered across the country and the globe. Online money transfer companies let you connect with your friends and family all over the place, and they can wire money to you so you can get started with your business. When you’re ready to start paying back those loans, send money to Mexico, Scandinavia, France, or somewhere else with ease. Investing in a new business or providing a loan is a risk, and if your business doesn’t do well, your friends and family need to be prepared. Have a long, frank conversation before any money changes hands to avoid ruining your interpersonal relationships.
Getting a loan from a bank is the traditional way new businesses begin. Today, more and more startups start with funding from another source, and you can, too. You aren’t limited to one source of funding for your business. Figure out how much capital you need, and if your first choice for funding doesn’t work out, you always have other options.