Entrepreneurship is something to which most of us aspire. We all want to leave the “rat race” behind and “be our own boss” and build something that is just ours that we can run the way we want to run. Unfortunately, for most of us, finding the funding to go solo is a huge challenge. Thankfully, it isn’t impossible! Even if your credit is less than stellar, there are options out there for you. Let’s look at some of the most common ways to get the funding you need to start your own small business.
Franchise Financing
Many new entrepreneurs choose to ease into business ownership by opting into a franchise agreement with an already existing brand. There are many benefits associated with going this route. One of the biggest is that instead of having to build an audience and customer base from scratch, you will be tapping into one that already exists and will have the support of the brand’s corporation behind you. Another benefit is that many franchising opportunities offer financing to those who can’t afford to pay the franchising fee up front. For example, UPS has a robust platform for those who cannot afford the initial UPS franchise cost.
Start Freelancing
Freelancing is a great way to start building a business without having to leave your current employment situation. The great thing about freelancing is that its setup is relatively quick and you can work on finding clients and building your infrastructure when you aren’t at work. The flexibility of freelancing allows for that. Going this route allows you to build up a good cushion to support you when you are ready to leave your formal employment behind and go it alone. It’s a safe way to make a scary leap.
Loans
There are many banks and credit unions out there that are more than happy to loan you startup funds for your new venture…if you have good personal credit and can provide an impressive business plan. The Small Business Administration has a great list of the different organizations out there that are dedicated to helping small businesses get up and running.
You might be tempted to take out a personal loan to cover your startup costs, but tread carefully. Mixing your personal finances and business finances rarely ends well. If you think this is your only route to funding, work with a business financial advisor to help you navigate the system. Do NOT simply apply for a massive loan and then use it to start a company.
Grants
Depending on who you are and the kind of business you want to build, there might be grant funding available to you. Grants are fantastic because they don’t have to be paid back. The application process can be complicated, though, so if you don’t know how to write a grant proposal, make sure you learn before you work on your application.
Grants also come with very strict strings about how, when, and where your grant money can be used. You will often have to provide proof that you are using the funds as intended and if you don’t, that grant might be rescinded.
Crowdfunding
Using Kickstarter to raise funds for building your business (like for buying or leasing a space, covering the cost of you leaving your day job, or other expenses) could be a great way to get the funds you need. There are, however, a lot of steps involved with creating a successful Kickstarter campaign. Do your research before you ask for money.
Kickstarter, however, is not the end-all, be-all of crowdfunding. If you need funding quickly and want to be able to keep whatever is given whether or not you meet your goal, portals like GoFundMe and IndieGoGo are good choices. These work much like Kickstarter but let you keep whatever you raise, regardless of your goal’s success.
If you are hoping to find something more sustainable, you might want to try setting yourself up on Patreon. Patreon has been incredibly useful for independent artists, journalists, etc. Patreon allows people to pledge money to you on a project or monthly basis. This is a great way to bring in supplemental or even full-time income to help you cover your day to day expenses.
In addition to getting the funds you need without having to pay them back (with interest), the biggest benefit to running a successful crowdfunding campaign is that it proves to larger lenders (like banks) that there is already a demand and an audience for your products or services. This will go a long way toward helping you secure traditional financing if you ever need it.
See? There are plenty of ways to raise the funds you need. Now, which method works best for you?