Our team has scoured the web for ways to fund small business; what they found has been neatly compiled here for your benefit. Was your business funded another way? Did we miss an obscure funding method? Leave us a comment – we’d love to hear from you!
Microloans
Crowd-funding:
Crowd funding refers to the collective cooperation, attention and trust by people who network and pool their money and other resources together, to support efforts initiated by other people or organizations. The purpose of crowd funding varies, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns. -Source Uslegal.com
Micro-financing:
Use micro-financing to gain credit when you cannot get it from a regular bank.
It is the banking of the unbankables, that brings credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral. -Source Microfinanceinfo.com
Peer-to-Peer lending (P2P):
Borrow and lend money with your peers in the business space.
A method of debt financing that enables individuals to borrow and lend money – without the use of an official financial institution as an intermediary. Peer-to-peer lending removes the middleman from the process, but it also involves more time, effort and risk than the general brick-and-mortar lending scenarios. -Source Investopedia.com
Friends and Family Shares:
Gain financing through friends and family by offering them stock before your business goes public.
Issuers and bankers may offer “friends and family shares” to business associates, family members or friends, prior to the stock’s launch to the public, allowing them a stake in the future success of the company. These shares may represent a small percentage of an offering, typically less than 5%, but can create significant gains for the holder. -Source Investopedia.com
Business Credit Cards:
Business credit cards aid in keeping businesses expenses on track and help in obtaining the purchasing power needed to run a business. Often times business credit cards will provide rewards for business purchases such as airline miles or cash back.
Merchant Cash Advance:
Your business sells a portion of its future credit card sales to a Merchant Cash Advance provider in exchange for a lump sum of working capital. Your business directs its credit card processor to automatically forward a fixed percentage of its credit card receipts directly to the provider as they are settled. -Source Advanceme.com
Microloans:
When you need only a little cash to grow, it’s time to check into microloans. -Source Entrepreneur.com
Private Loan Guarantees:
You’re early stage, the bank is ignoring your pleas–what do you do? Find an investor to guarantee your loan. -Source Entrepreneur.com
Microlenders:
Microlending can be used to obtain small amounts of credit not normally available.
Provides small amounts of capital that would not be considered cost-effective for a traditional lender, enabling disadvantaged individuals to have access to small amounts of credit. -Source BusinessDictionary.com
Start Up Programs
Business Incubation:
Business incubation programs are designed and intended to support the successful development of entrepreneurial companies through an variety of business support resources and services. Successfully completing a business incubation program will likely increase the longevity of the start up business.
Business Plan Competitions:
Business plan competitions are an alternative source of financing that involves the least amount of risk to you and your business. They typically do not require you to show your credit score or put up collateral as well as there are no penalty fees and you are not required to repay anything you win.
Government Programs
Community Development Financial Institution (CDFI):
So you’re not “bankable” according to traditional rules–your community may still have resources to help fund your business. -Source Entrepreneur.com
CDFIs serve economically distressed communities by providing credit, capital and financial services that are often unavailable from mainstream financial institutions. -Source CDFI.org
SBA-Guaranteed Loans:
The SBA’s got your back. With an SBA-guaranteed loan, they’ll guarantee as much as 80 percent of the principle. -Source Entrepreneur.com
504 Loans:
If you’re buying a fixed-asset like land, buildings or long-term equipment, look into a 504 loan. -Source Entrepreneur.com
Federal Government Venture Capital:
SBA-licensed one-stop funding shops SBICs and SSBICs are looking for businesses to fund. -Source Entrepreneur.com
SBA 7(a) loans:
The SBA offers loans to small businesses unable to get loans through normal channels.
SBA’s primary lending programs to provide loans to small businesses that are not able to get business loans on reasonable terms through normal lending channels.It helps start-up and existing small businesses to secure financing when they might not be eligible for business loans through normal lending channels. -Source Uslegal.com
Small Business Innovation Research Grants:
A grant offered by the government eligible for business that deal with emerging technology. SBIR encourages small business to explore and develop their technological potential. -Source SBA.gov
Offices of Economic Development:
The government works to create and promote job opportunities.
Its basic principle is that the government can help to create an environment that encourages innovation, rewards risk-taking and promotes equal opportunity ranging from job priorities, investing in public infrastructures to developing affordable housing. -Source HUD.gov
Small Business Investment Companies:
An SBA licensed company focusing on small business investments.
A privately-owned investment company that is licensed by the Small Business Administration (SBA). Small Business Investment Companies (SBICs) supply small businesses with financing in both the equity and debt arenas. They provide a viable alternative to venture capital firms for many small enterprises seeking startup capital. -Source Investopedia.com
Grants:
Money or financial assistance that is given by the government to those who qualify, with no expectations that the funds will be paid back or returned.
Bank Programs
Small Business Lending Fund:
A part of the jobs act that encourages lending to small businesses.
A $30 billion fund that encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. Through the Small Business Lending Fund, Main Street banks and small businesses can work together to help create jobs and promote economic growth in local communities across the nation. -Source Treasury.gov
Business Line of Credit:
A business line of credit is a true asset of your business to help meet the short term working capital needs like covering cash flow shortages or purchasing increased seasonal inventory or unforeseen operating expenses. -Source Businessfinance.com
Asset Based Lending/Financing:
Your small business can make use of your inventory to secure working capital.
A loan, or line of credit, that is secured by inventory that provides structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment and/or real estate. This type of financing is best for start up companies, refinancing loans and management buy-ins/outs. -Source Investopedia.com
Bank Loan Options
Accounts Receivable Financing:
You can use money that you are owed by customers as financing in an agreement.
A type of asset-financing arrangement in which a company uses its money owed by customers as collateral in a financing agreement. The company receives an amount that is equal to a reduced value of the receivables pledged. The age of the receivables have a large effect on the amount a company will receive. The older the receivables, the less the company can expect. -Source Investopedia.com
Acquisition Loan:
A loan given to a company to purchase a specific asset or to be used for purposes that are laid out before the loan is granted. The acquisition loan is typically only able to be used for a short window of time, and only for specific purposes. Once repaid, funds available through an acquisition loan cannot be reborrowed as with a revolving line of credit at a bank. -Source Investopedia.com
Bank-Term Loans:
A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate. Term loans almost always mature between one and 10 years. -Source Investopedia.com
Royalty Financing:
You can use future sales of your product to ensure a loan.
Alternative Loan Sourcing
Bartering:
The act of trading or exchanging of goods and services without the use of money. It enables those who lack monetary currency to still receive goods and services.
Vendor Credit:
A loan from one company to another which is used to buy goods from the company providing the loan. The vendor increases sales, earns interest, and may sometimes also acquire an interest in the customer. -Source Investorwords.com
Customers/Vendors:
Someone or an organization that receives and/or sells goods and services from or to another party and has the ability to choose between different products and businesses.
Factoring:
A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital. -Source Entrepreneurial.com
Purchase Order Financing:
The steps to purchase order financing are: get a purchase order from customer; find a reliable supplier for the products, and lastly place the order with that supplier. It is a great solution for when cash flow reserves are low. Purchase order financing frees up cash for critical business expenses. Another benefit is that it does not show up as debt for business. This makes it possible to not only use extra cash to get discounts on purchases, but it also allows business to get approved for morefinancing. -Source USLegal.com
Equity
Equity Financing:
The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. -Source Investopedia.com
Venture Capital:
Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt. -Source Investopedia.com
Angel Investors:
Refers to anyone who invests their money in an entrepreneurial company. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times. They are focused on helping the business succeed, rather than reaping a huge profit from their investment. Angel investors are essentially the exact opposite of a venture capitalist. -Sources Entrepreneur.com and Investopedia.com
Direct Public Offerings:
Take your business–and your quest for funding–directly to the public by selling shares in your company. -Source Entrepreneur.com
Initial Public Offerings:
Ready for a whirlwind ride? Take the ultimate funding trip by going public. -Source Entrepreneur.com
Personal Assets
Mortgages:
Used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front and the borrower is obliged to pay back with a predetermined set of payments. -Source Investopedia.com
401(k) Financing:
Use your retirement account from previous jobs to fund your new business.
Bootstrapping/Personal Savings:
Stretching all of your resources as far as they can go can be an effective way to increase cash flow.
is the ability to stretch resources–both financial and otherwise–as far as they can go. Bootstrapping is one of most effective and inexpensive ways to ensure a business’ positive cash flow. It means less money has to be borrowed and interest costs are reduced. -Source Entrepreneurial.com
Retirement funds:
A savings plan created by companies or the government for employees that provide income after they have retired from their employment.
Personal Credit Cards:
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. -Source Investopedia.com
Niche Financing
Reverse Merger:
Take your private company public the easy way by purchasing a dormant, public company. -Source Entrepreneur.com
Equipment Leasing:
Short on cash, but need new equipment to grow? Lease what you need. -Source Entrepreneur.com
