Financials and Cash Flow

Discover financing opportunities

To find funding, think creatively.

Published: April 08, 2013
Updated: January 27, 2017

There's a persistent myth that credit is a closed circle — to succeed you need credit, but to get credit you need to be successful. It's true that traditional lenders generally serve established businesses with positive cash flow. However, there are many other options that can provide funding when you're just getting started, as well as help you build credit on your way to securing mainstream funding.

"The key is to think creatively," says Kedma Ough, an economic development consultant, business adviser, and owner of business consulting firm AVITA & Associates. "Be very positive, but very strategic about your relationships. Above all, be creative about finding new approaches, avenues, and opportunities."

Making the connection

To help shift your perspective, take a step back from actual lenders. Instead, think about "connectors." That's Ough's term for the people who seem to know everyone in an industry or community, such as organization leaders and members of chambers, committees, and boards. "They often know about funding sources that you don't, and find out about opportunities before they happen. It's like they've been invited to the party — when you don't know there is a party."

Take a few steps back from your surroundings as well to connect on a national level. National organizations might not help you directly, but they'll know about local funding sources because they advocate for them. Start with industry associations, small business groups, or advocacy organizations specific to your field. Groups that serve a specific population, like the national women's, Hispanic, Asian, or African American chambers of commerce can also be very helpful.

When you do approach a traditional lender, bring the same level of engagement to that relationship as you do with community organizations. "I've seen loan officers bend over backwards to help a first-time business owner get off the ground," says Ough. But like any business contacts, building understanding and trust is a long-term process that takes consistent effort. 

Funding outside the box

Be on the lookout for nontraditional opportunities. For instance, a wide range of nonprofit and community organizations are dedicated to providing financial and technical support for small businesses. Broaden your funding search to include:

  • Organizations such as nonprofits, microlenders, community organizations, and universities. They may not have money to lend, but often know who does.

  • Financing options in unusual forms. For example, "forgivable loans" never have to be repaid as long as you meet certain conditions, such as creating local jobs. Crowdsourcing can also help find funds in a nontraditional format. 

  • Grant funding may be available for specific purposes. For example, the federal Small Business Innovation Research (SBIR) program targets promising entrepreneurs in a wide range of fields.

  • Nonfinancial resources for help in areas such as business plans, databases, engineering, and marketing. Getting services for free that you'd ordinarily have to pay for is as good as cash.

  • Individual Development Accounts (IDAs) provide contributions to match a personal savings goal, such as starting a small business, using money from government agencies and nonprofits. Funds can be matched by as much as a four-to-one ratio and never have to be repaid.

Find the hidden money

There's "hidden money" among organizations dedicated to helping small business owners and their communities succeed. To find it, "attack funding sources the same way you would do a niche in your market," says Ough. Some programs narrow their focus using criteria such as locality, industry, innovation, or use of funds. Understand which categories are appropriate and go after them. Timing is also important. "Many funding sources are available for a limited time, or have a fixed amount to loan. Get yours before it's gone."