Data indicates that businesses are having difficulty obtaining business loans, and this can end the career of an emerging businessperson before it even starts.
Successful small business owners told us where they went for capital when they were just beginning. Read on for their advice!
1. Ask your friends and family
Ashley Jameson, Asian Capture
“I started an online business and needed $2k. Rather than go to the bank, I started a crowdfunding campaign on Go Get Funding and bought in donations mainly from friends and family that supported my venture.”
Tim Doyle, The Twovet
“Newly created small businesses should consider going to friends and family for capital. Although this usually comes with increased drama, it is a great source when starting out. Over time, depending on the type of your business, manufactures, small banks and suppliers may consider funding your business if they understand and like you. Most small business investors invest in people, not in businesses.”
Daniel Horning, HireAHelper
“Raising capital has been no small feat for our company in the 5 years we’ve been booking moves. Our first amount came from a small circle of friends & family, which would always be my first recommendation: start with those closest to you. They know you and have more reason to believe in your product, with less of an interest in controlling what you do.
Our second investment came in a more creative form, as a revenue loan from Lighter Capital. Their revenue loan gave us the funds to continue expanding our tools and features without giving up any control over our company’s direction. Instead of giving up equity, the revenue loan is paid back as a percentage of revenue, so that as our revenues increase, Lighter Capital gets their money back faster. There’s a time and total $ cap on the payback amount. It ends up working really well for both of us.”
2. Try crowdsourcing
Lucy Foster, Swogo
“Crowdfunding allows a variety of investors to place as small or large an amount of capital into your business as they wish, meaning you can achieve the investment you need without relying on simply one investor. At the moment, SEIS in the UK and the JOBS act in the US make this an appealing prospect for investors, and with the ability to give away as small an amount as they wish, it’s often easier to secure the amount of capital you need.
To add to this, as a user-facing company, we found that having the ‘crowd’ validate our idea was extremely important. Knowing that a variety of different investors were willing to place their capital in simply an idea helped demonstrate to us how our idea was worth pursuing.”
3. Find an angel investor
Estelle Puleston, Etsy Lingerie
“When I decided I wanted a bigger investment I went with an ‘angel investor’ who liked my proposal and invested some money. In the end though it went so well (for both of us) that I persuaded my mum to become my new investor, and now we’re both benefiting from her lending me money for the business. I have a better cash flow, and she gets a decent return on investment at the end of every month without working for it at all – since she’s my mother, I’m not bothered by this!”
4. Obtain a line of credit by leveraging your assets
Leslie Tayne, Law Offices of Leslie H. Tayne P.C.
“Upon launching my business in January 2001, I took out a loan from my house via a home equity line of credit (HELOC). New small business startups can find financial assistance with small SBA or local banks, home equity loans, grants and/or via private equity. New businesses with little capital and history are likely to find more financial support from private equity firms.”
Ryan Blakemore, Radix Collective
“Depending on what the small business can leverage, these businesses should go to some of the newer alternate lending options available. Places like SpotLoan, On Deck Capital, Kabbage, and FastPay. All of these places leverage different assets to underwrite loans – but the underlying factor is that they all give money fast and use innovative underwriting techniques that traditional lenders (i.e. banks, VC’s, etc.) aren’t advanced enough to use.”
5. Join a startup incubator
Ross Betts, SpareFoot
“Initially, SpareFoot co-founders Chuck Gordon and Mario Feghali requested small amounts of start-up capital from relatives and close friends, but as the idea developed they applied and were accepted to a startup incubator program at the Capital Factory in Austin, TX. Incubator programs are a fantastic resource for new businesses that
have little capital and no history. Incubator programs and Venture Capitalists are always looking for the next big idea, and have become a huge part of the entrepreneurial/ startup process. For many ideas to get off the ground, incubator programs and venture capitalists are a must.”