3 Ways To Get Funding For Your Business

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Most small businesses fail. According to the Small Business Administration (SBA), 50% of small businesses fail after 5 years. One of the main reasons why businesses fail is because of a lack of funding. While many entrepreneurs were able to self-start or get money from family or friends, they typically will need more capital to keep going. This was especially true during the pandemic.

COVID-19 hit businesses hard, especially minority-owned businesses and many began seeking funding. While the government provided funding opportunities such as the Paycheck Protection Program (PPP), many minority-owned businesses did not reap the rewards. There are many stories of small business owners who did not get the funding they needed from the government. 

Why Does a Business Need Funding?

If you’re looking to start a business or in the process of doing that, there are many expenses you’ll have to think about. Some expenses you’ll need to funds for are:

• Mockups if you’re selling a physical product
• Marketing and advertising to get your business out there
• Education for your staff
• Brand building 
• Expert help 
• Wages for contractors or regular employees
• Benefits for staff
• Equipment which includes the regular maintenance and upgrade of equipment.
• Website domains
• Subscription services like Quickbooks 
• Legal fees
• Insurance fees
• Equipment rental or purchase
• Utility costs
• License and regulatory fees

As you go through your entrepreneurial journey, you’ll find many different expenses popping up. Don’t worry, there are tons of ways to get funding for your small business. 

Where to Get Funding For a Small Business

There are many avenues to get funding for a small business. You can fund your business by:

• Getting a loan
• Winning a grant
• Finding investors

Even if you get rejected for funding, remember there are many ways to access funding. There are online banks, credit unions, startup loans, invoice financing, equipment financing, and more. 

Speaking with a financial advisor can help you make a decision about what avenue or avenues to take. 

Get a Loan

People tend to have a negative look at debt. When people think of debt, they picture owing money they’ll never be able to pay back. They think of debt collectors harassing them or having to live a lower quality of life because they owe money.

However, debt isn’t inherently a bad thing. You can get a loan to get your business back on track. Loans can help you pay your employees, rent, mortgage, and take care of so many other business expenses. In order to be qualified for loans, you’ll need to be bankable. Being bankable really means positioning your business to get funding. 

In addition to being bankable, you should also be aware of all the places you can get loans from. Some institutions have stricter credit requirements than others, different processing times, and lend various amounts. You’ll have to consider your unique business situation while approaching an institution for a loan. 

Traditional Financial Institutions 

Traditional financial institutions such as banks offer loans to small businesses. According to Nav, there are many pros to accessing a bank loan. For example, banks tend to have lower interest rates. The bank’s interest rates are usually fixed which means they won’t fluctuate and hurt your pockets. In addition to that, you have the opportunity to build your business credit with bank loans. 

A con associated with bank loans is that you need strong credit.

According to Nav, “Traditional lenders like a bank don’t want to lend to borrowers that have a weak personal credit score or a shaky business credit profile.”

If you have a strong credit history and a great relationship with your bank, you could qualify for a loan. 

On the other hand, small business owners have struggled to access bank loans over the years. If you have been rejected by your bank, there are other options. 

Microlenders

Microlenders are institutions that provide small loans to disadvantaged or underserved entrepreneurs. According to Nav, loan amounts typically range from $6000-$15000. 

Entrepreneurs opt for microlenders because they have more flexible credit terms than a traditional bank. Microlenders look at cash flow over credit score. That’s great news for the 80% of businesses that get rejected because of their credit.

However, microlenders’ interest rates may be higher than a bank. According to Nav, “They may charge slightly higher interest rates than traditional bank loans, but less than other financing sources that may be available to entrepreneurs who fall in a higher risk category due to time in business, revenues and/or credit scores.”

Even though they’re a lot of microlenders out there, we recommend Bank Breezy. They offer same-day loans of up to $25000 and all businesses are considered. Sometimes traditional banks don’t offer loans that small or that quickly. That’s why microlenders can be helpful for small businesses. 

Small Business Administration (SBA)

The SBA is a great resource for small businesses to access funding. While the SBA doesn’t give you funding directly, they work with lenders. The SBA sets guidelines for its partnering lenders, community development organizations, and micro-lending institutions. They help these organizations reduce risk and so small businesses have an easier time accessing loans. 

Loans the SBA offers are:

• 7a loans
• 504 loans
• Microloans

Getting loans via the SBA has many benefits. For example, some loans won’t need collateral. In addition to that, the SBA provides business support and competitive terms. 

Win a Grant

Grants are monetary gifts. That means you don’t have to pay them back. Some grants have specific instructions on how you can spend the money. However, learning how to win grants is a valuable skill that can keep your business funded without adding to your debt. 

Since there are many business owners, just like you, trying to get a grant to keep their business afloat or expand it, you’ll have to stand out. You can access our Win Grants with Ease Checklist so that you can submit a great application. If you need even more help, you can grab our Win Grants With Ease Bundle. 

You may be wondering where to find grants. There are many places to access grants such as the Small Business Administration and the government.  You can also do a quick Google search with grants and whatever business you own. For example, you can search ‘grants for beauty salons’. You can be even more specific and search for grants in your area. For example, you could type in ‘grants for beauty salons in LA’.

You can even type in “grants for women-owned businesses” or “grants for minority-owned businesses” on a regular basis and see what pops up. Chances are, there is a grant out there for your business with your name on it. 

Find an Investor

One way to get capital into your business is by getting investors on board. You don’t have to think big, you can get investment from family and friends. However, remember, if they invest in your company, they have a stake in your company. 

There are many ways to get investments. For example, you can get a private investor or even try crowdfunding.

Private Investors

You can find private investors by asking your network or the internet. In general, there are two types of private investors, venture capital and angel investors. 

Venture capitalists tend to invest in businesses looking to grow. However, they may invest in startups. These investors typically set up funds so others can purchase shares in the company. They don’t use their own money. 

Angel investors on the other hand are more likely to invest in start-ups. They will own shares in the company and want to voice in the running of the company. Angel investors use their own money. 

Crowdfunding 

There are many ways to crowdfund and get money into your business. According to Freshbooks, you can try:

• Reward-Based Crowdfunding- Instead of shares, the investor gets a reward such as your product. The money invested is usually small and this is geared towards startups. A great platform for that is Kickstarter.  
• Donation-Based Crowdfunding- As the name suggests, people who donate aren’t expecting anything back from you. A platform commonly used for this is Go Fund Me.
• Debt-Based Crowdfunding- This is also known as peer-to-peer lending. Through a peer-to-peer lending facility, investors may lend you money. Your money won’t be protected by the government though. A platform that facilitates this is Lending Club. 
• Equity Crowdfunding- Investors don’t get back their original investment but they get a cut of the profit. They will also have some ownership of the company. A platform you can access this type of investment from is OurCrowd.

What Do Investors Look For?

At the end of the day, investors are typically looking for a return on their investment. Therefore, they’re more likely to invest in companies that are likely to give them that. Investors will want to see:

• Financial statements
• Your business plan
• Who is running your business
• Your product or idea
• How you’ll measure success

After they’ve examined all of these different elements, then they’ll decide if the investment is worth it for them. 

Conclusion 

Small businesses go under so often because of a lack of funding. Don’t let this happen to you. Take some time to explore funding options and see how they can best help your business. You can talk this over with a financial advisor and mentor. At the end of the day, just make sure the funding will keep your business afloat and will be worth it in the long run.