10 Ways to Fund Your Small Business

Building a small business doesn’t happen overnight (but I don’t have to tell you that). It takes planning and funding to bring your business idea to life. Maybe you’re working a full-time or part-time job and have some savings on the side to invest in your business, but it’s not enough.

The thing is, there are other ways to fund your business idea and it’s important you know what they are. In this post, you’re going to learn the 10 ways to fund your business.

10 Ways to Fund Your Small Business

Finding the funds for your small business can be a challenge. You’re just starting to bring your idea to life, but at the same time, you still have bills to pay and possibly children to raise. If you want to find funding outside of putting savings aside every month, here are some options for you.

Crowdfunding

There are a few really great crowdfunding websites out there that have become extremely popular with entrepreneurs, investors, and the general public. While each platform has its perks (and something you should investigate when reading the details), they allow people to invest in your business to help you reach your business goals.

Some of the best crowdfunding websites are:

Small Business Administration (SBA)

The U.S. government wants small businesses to succeed. That said, they offer various small business loans to help entrepreneurs like yourself get started. Depending on the type of business you have, if it’s a non-profit or educational institution, you may be eligible for certain small business grants. To explore the different SBA loans available, click here.

Microloans

Even though microloans are typically used for non-profit organizations, they can also be given to small businesses or individuals who do not normally qualify for a traditional bank loan. For example, rather than giving a donation, microloans are used to invest in an economic opportunity. Microloans are popular within developing countries as well.

The U.S. government has a microloan program that your small business may be eligible for. Click here to learn more.

Product pre-sales

If your small business is based on selling a product, a great way to raise money to produce your product is to pre-sell it. By pre-selling your products, you will only produce what is purchased, so you don’t have a storage unit full of unsold products. 

Naturally, this can be intimidating, but as a business owner, you’ll need to have a timeline in place and follow through on it. If not, customers will ask for their money back, and then you’ll have real problems.

Friends and family loans

Also known as love money (but honestly, that sounds kinda weird, right?), your biggest support system is your friends and family. Naturally, they want you to do well and succeed in your goals and dreams. Asking them to invest in your business can help you get started. But, I will warn you that things can get tricky, so you need to consider the pros and cons before accepting their investment. 

While this may sound a little awkward, having a contract that they sign in the beginning can help prevent any misunderstandings. As a business owner, you will be responsible for how you use those funds and they need to know that.

Contests

This sounds a little crazy, but I wouldn’t have included it on this list if it wasn’t working for people. Believe it or not, there are organizations that offer monetary financing or rewards for businesses that enter and win their contests. Every contest has its own requirements, and judging criteria varies, but if you believe in your business, you may be able to win some cash.

Mission-driven lenders

Another option is a mission-driven lender if you’re not eligible for a traditional bank or SBA loan. Mission-driven lenders focus on working in communities that traditional financial institutions do not serve. These lenders include community development financial institutions (CDFIs) and work hand-in-hand with entrepreneurs, guiding them throughout the loan process.

While the loans are typically smaller than what you’d receive through a bank, they provide you with valuable knowledge that will help your business in the future.

Self-funding

Most small businesses start this way—this is how I started my small business. I didn’t want to get a loan or seek outside funding, so I used my savings to start my business. Self-funding is one of the primary ways small businesses get started.

You can start by putting a little money on the side every month to get started. You can also look into refinancing your home, but you should only do that if you’re comfortable and can handle the potential consequences.

Angel Investors

Angel investors are different from other funding options available because they are always looking for the next business to invest in. Actually, many of today’s largest businesses, like Google, Twitter, and Zappos, were funded by angel investors.

While every deal is different, angel investors typically will give your business funding while taking some share of equity in your business. Any angel transactions must be registered with the Securities and Exchange Commission (SEC).

Banks and Credit Unions

Bank loans are a very popular source of funding for small businesses. Many banks offer customers repayment plans, and individuals have access to a large amount of funding to build their business credit. If considering opting for a bank loan, shop around and see what banks are willing to offer you. Oh, and for a business bank loan, you’ll want to make sure you have a solid business plan prepared.

Over to You

Starting your business is an exciting journey and you want to make sure you have the funding to get it started. Research the options provided above and see which funding options best suit your needs and criteria. 

Once you select the funding options that work for you (you can choose more than one), it’s time to start applying and reaching out to these funding institutions or communities.

Disclaimer

The information provided on this page is for information, educational, and/or editorial purposes only. It is not intended to indicate any affiliation between Tailor Brands and any other brand or logo identified on this page.

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