5 Small Business Funding Options to Consider

5 Small Business Funding Options to Consider

Financing a small business is always a big challenge. Of course, you can get funding by applying for government grants for small businesses but there are other ways to finance your business. Here are some useful ways to find the money you need.

1. Consider Factoring

Factoring is one of the ways businesses secure funds. In this case, the company sells its receivables to get cash up-front for a small fee. This method is usually common among business owners with poor credit or businesses, such as apparel manufacturers, that have to fill orders long before they get paid. Though it’s a great way to secure funds, it can be expensive.

2. Self-Funding

Many entrepreneurs self-fund. Keep in mind that this takes a lot of commitment and dedication. You either have to use your personal savings or take on debt such as credit cards or a second mortgage. In some instances, small business owners sell their valuable assets to raise funds for the business.

3. Loved Ones

Most friends and family members want to see you succeed. And they will stop at nothing to help you. Such people can provide either equity or debt funding. No doubt, this is a great way to generate funds but be careful about bringing them into your business. Make sure you think it through before reaching an agreement. The sad thing is that more than 80% of new businesses fail in the first few years. The loss of capital can make your relationship go sour or result in an unpleasant family gathering. It is important to fill them in on the risk involved before they invest in the business.

4. Cash in Your Retirement Account

Are you unemployed and are looking to staring your own small business? If you don’t have the required funds to bring your idea to life, you can use the funds you’ve accumulated in your retirement account over the years. However, you have to follow the right procedures to tap into these programs before your retirement. Otherwise, you may be penalized. The procedures are quite simple but legally complex. Keep in mind that your retirement funds are at stake here. So if anything goes wrong, you will lose everything including your business and retirement funds. This is a risky business decision that you should only make after careful thought and consideration, as well as a discussion with your financial advisor.

5. Crowdfunding

Crowdfunding consists of web-based projects that allow small business owners to reach out to millions of potential investors worldwide through many different platforms. Investments can be debt, equity or reward-based. Keep in mind that there are different crowdfunding platforms available, so you will need to conduct thorough research to make an informed decision. All in all, crowdfunding can be a great way to secured funds for a relatively low-cost project.

There are more small business funding options to explore. However, with a comprehensive business plan and great commitment and dedication, you can generate the much-needed funds you need to finance your project.


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