Four unique funding options for small businesses
For new businesses, it may be beneficial to seek nontraditional funding options.
Getting approved for financing is a big challenge many new business owners face. Traditional lenders, like banks, may be reluctant to extend credit to businesses that haven't proved successful in the business world yet. However, that doesn't mean you're out of financing options.
Here are a few nontraditional funding options you may want to consider:
1. Forgivable loans
Getting approved for a loan you never have to pay back might sound too good to be true, but it is possible. Some state governments give businesses forgivable loans if they meet certain conditions, such as creating jobs and improving the economy.
2. Microfinance lenders
Microfinance companies may have less stringent guidelines for borrowing than traditional banks and may lend up to about $50,000. In addition to lending, these companies may also educate business owners how to get the most out of the money they borrow. To find microfinance lenders who may be in your area, explore Venturize, a free online resource that includes a directory of mission-driven lenders. It was created by Opportunity Finance Network, a national network of mission-driven financial institutions investing in low-income communities.
Crowdfunding, which involves raising capital from a large number of people, is another funding option you may want to consider for your business. If you can convince multiple individuals to give your business a small donation, you can raise a lot of money. Increase your chances of a successful crowdfunding campaign by preparing a business plan that shows you have invested your own capital and providing perks for those who donate.1
4. Angel investors
Another way to obtain funds for your business is to contact angel investors. These individuals give money to businesses in exchange for ownership equity. To persuade these investors to fund your business, create a detailed presentation that contains information about your product/service, the problem you are going to solve, marketing strategy, business model, the competition, and financial projections.
Your business isn't limited to traditional loan options. If you think outside the box, you can find nontraditional opportunities and secure adequate funding for your company.
1"The Basics of Crowdfunding." Entrepreneur. https://www.entrepreneur.com/article/228125