Whether you are just starting your small business or you are looking for a way to expand in a new market, finding the right sources of financing is essential to your success. However, unless you are independently wealthy, getting the money you need may be challenging. To find financing for your small business, use the tips below.
- Seek out investors.
If you are still in the planning phase, actively seek out investors who believe in the future of your business. To secure this type of investor, you must typically be able to convince the investor that your business has what it takes to succeed and make the investor some money. Before you begin talking to potential investors, consider creating a short presentation that explains how your business will operate and your hopes for the future.
- Look for venture capitalists.
If your business is already bringing in some revenue, you may be able to secure more funding by building relationships with venture capitalists. Keep in mind that many venture capitalists expect to recover their investment and begin earning an income in as little as three years. However, working with venture capitalists can be beneficial to your business in other ways as well, since these individuals often have experience and insight with the specific market in which they choose to invest.
- Consider crowdfunding.
Another excellent option for businesses that are still trying to get off the ground is crowdfunding. Crowdfunding platforms allow businesses to collect small investments from multiple investors in order to accumulate the funding they need. In some cases, these investments may be made in exchange for an interest in the business. In other cases, you may reward your investors with free products or discounted services. Most crowdfunding platforms will also keep some of the money you earn, so make sure you understand the arrangement before you get started.
- Talk to friends and family.
In some cases, you may be able to secure some of the funding you need for your small business by asking your friends and family members to invest. However, make sure that you reach an agreement on what each person will receive for his or her investment. While some family members may give a donation to your company without expecting anything in return, others may expect you to repay the investment within a certain amount of time. Friends or family members who invest in your business may also want to have a stake in the business and/or participate in the decision making process.
- Get a business loan.
The standards lenders use to evaluate business loan applications have become stricter over the years. However, some lenders are still willing to extend financing to small business owners, especially if you are able to show that your business is already bringing in revenue. Consider looking for lenders in your area that offer small business loans and submit an application.
- Use factoring.
If your business is already in operation, you can boost your financing by using a strategy known as "factoring." Factoring involves selling your accounts receivable to a third party at a discounted price in order to get the money faster. Although you won't earn as much as you would have if you had collected from customers on your own, you won't have to wait as long to start bringing in revenue.
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