No matter what line of business you are in, one thing is certain. If you are to ensure continued success you are going to need a steady flow of funds available to you. Sometimes your profits alone are not enough, especially in the early days or when you are looking to expand. That means that you will have to look at other funding options such as loans and investments.
Taking Out A Small Business Loan
The most obvious solution when you are in need of funds for your business is to take out a loan. There are many options available including traditional bank loans and alternative lenders. If you are just starting out then your business may not yet have a solid credit rating, but that does not mean you will not be eligible for a loan.
You will find that online lenders especially will be more willing to work with bad credit and there is always the option of taking out a secured loan. Often people assume this option is only available to home owners, but in fact small business owners can also use business equipment or even a car as the collateral to guarantee a business loan.
Credit is not such a big deal with secured loans since the lender sees the presence of collateral as a way to lower their level of risk. It is well worth it to research several different lenders both online and more traditional options.
Finding An Angel Investor
Sometimes a loan is not the most appropriate source of funding, either because you do not want to accumulate the debt or because you do not have the ability to make repayments at this particular time. In this case you may want to look for investors.
One popular form of investment for many business owners is ‘angel investors’. An angel investor, also known as a business angel, is usually a wealthy individual who offers capital to a business in exchange for a percentage of your business. Often they are willing to act as a sort of mentor at the same time offering not just funding but also valuable advice.
Angel investors are not all that dissimilar to regular investors, apart from the fact that the agreement is somewhat more informal. If you are to attract your own angel then you need a solid business plan and a great idea. The majority of ‘angels’ are retired entrepreneurs looking for the thrill of helping to build a new business.
Consider Crowd Funding
One of the latest trends when it comes to obtaining funding for a small business is crowd funding. This has exploded in popularity over the last 18 months and there have been some amazing cases making the news lately.
One of the major success stories that comes to mind involves the Pebble SmartWatch which achieved in excess of $10 million from around 69,000 backers last April. Of course that level of success is the exception rather than the rule, but it certainly serves to illustrate the point that crowd funding is a viable option with most successful crowd funded projects raising between $5,000 and $25,000.
There are four key steps to take for successful crowd funding:
- Get the presentation perfect. The more compelling your pitch the more likely your will be to get backers.
- Do not be greedy! Ask for the right amount by calculating how much your planned project will cost. Asking for too little is pointless, but asking for too much might put people off.
- Promotion is a vital part of a crowd funding campaign. You need to get the word out to potential backers. Never simply rely on your project being on the crowd funding website.
- Look for other funding options too. Do not rely only on crowd funding. You may find it better to split your target between crowd funding and another type of investment.
There are a number of different ways to help create a steady flow of cash for your business, whether you are looking for the funds to get started or you are hoping to expand your empire! A business loan is a great option, but it is not the only choice you have. Here I have mentioned just a few of the alternatives, but with some research you are sure to find lots more.
Hugh Tyzack, founder/managing director of Loansforbad-credit.co.uk, is an expert when it comes to helping individuals who have bad credit to obtain loans. In his spare time he loves to relax by playing the piano and is a dedicated music lover. You can find out more about Hugh by visiting www.loansforbad-credit.co.uk/logbook-loans or by looking him up on Twitter @badcreditloans8 or Google+.
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Category: Startup Advice