How To Finance A Small Business

Obtaining funds to finance the growth of an SME is a constant challenge in the lives of entrepreneurs; finding the funding you need for your small business has never been a simple task. It gets even worse if the current economy shows very poor growth and stagnation of consumer consumption. Therefore, setting up a business and finding the necessary financing to carry it out is presented as an almost titanic task, with many uncertainties.  

The good news is that there are new channels available for small and medium businesses, such as crowdfunding, bootstrapping and more. Many are having a significant impact in recent times. Here are a few funding tips to consider: 

 

1. Bootstrapping

Bootstrapping often refers to starting a business with no resources or with very few resources. In the area of ​​business, it means to exercise some entrepreneurial activity with little or no capital, such as undertake activities with only the means that are within reach.  A considerable advantage of bootstrapping is that the risk is almost zero since the business owner will not owe anything to anyone. If they fail, they will not have lost too much, and can always try again. 

 

2. Bank Loan

Going to the bank to ask for a loan has become the norm for many small businesses. The problem with borrowing from the bank in the case of SMEs occurs when companies need to have extra capital that allows them to grow. It is a situation that makes the possibility of banks granting them credit more complex since they prefer to invest in larger companies that present a lower risk when it comes to meeting financial obligations. 

 

3. Get A Credit Card

A corporate card can be used to order the daily expenses of your company and works as a line of credit, since the payment is made after the expiration, as in the case of personal cards. Some cards can offer discounts on business-related items as an additional advantage.  

Obtaining a credit card from the bank is prevalent in many businesses. However, as a new business, you will need to ascertain that you have good credit to do this. If not, it may be best to consider alternative methods such as using companies such as Bonsai Finance. They can provide credit cards for people with poor credit. 

 

4. Use Startup Incubators

If your business model demonstrates the intensive use of technology and is scalable, it is likely that the type of funding that will most benefit your business is an incubator or a business accelerator. Most often, these types of funding will help to shape your business ideas, and you may also get some good mentoring and financing to get your business running. 

 

5. Consider Leasing

Leasing is a form of rent with purchase option, which can be used to acquire vehicles, machinery or other goods of great value. The payment period is usually between 36 and 60 months, depending on the item. Once finished, the product can be returned or your purchase can be completed at a pre-established value, which is lower than the market value, taking into account the expenditures made as a rental and the wear of the good during the time in which it was already used. 

 

6. Consider Networking

The use of networking through the exchange of services involves reaching agreements with other companies to form a relationship in which everyone somehow wins one way or another. Although this method does not directly involve you getting finance, it does somehow help to reduce the fixed costs of your business and can help your company save money. 

The only downside with this method is that when dependency on such business relationships is created, there is always the risk of conflict where one of the parties does not comply with the original agreement. 

 

7. NegotiateAnAdvance With A Client

If you are lucky enough to find clients that are willing to purchase a product or service even before launching your business, you can use that money to finance other needs of your business. However, it is best to only count on clients that assist with giving your business a better image, are trustworthy, and that also value the quality you have demonstrated on previous occasions. This is good because you will be certain that these are loyal clients, and this can become a recurring way to finance your activities. 

 

8. Use A Business Angel

Angel investors are a great option because they tend to demonstrate a social commitment to the community in which they find him or herself. They are usually successful entrepreneurs or investors seeking the development of entrepreneurs. 

 

9. Consider Venture Capital Lenders

If your business idea can somehow demonstrate that it is scalable and that it can generate profits in the short-medium term, it may be worthwhile to consider using venture capital funds. The positive part of using such a service is that such investors are used to losing money and are used to risk. They understand the reality and know that if one of their investments goes well, the benefits they will gain in return will be enormous.  

The downside is that many venture capital companies are more concerned about the benefits the funds will bring to themselves rather than the company, sometimes forcing the founders to make decisions that they do not truly want. 

 

10. Consider Crowdfunding

Crowdfunding is a great alternative when financing a company. It allows any small investor to bet on your company, and the investments are often backed by the transparency and quality of the company providing the service. When considering crowdfunding, it’s always best to have an idea of the kind of funders you want to invest. 

 

11. Ask FamilyAndFriends

Resorting to family and friends is another option to consider if you really want to get your business off the ground and grow it. With a collective investment, they can help to offer you the initial kick which you need to start your project.  

 

If the above alternatives do not fit the financial needs of your company, do not be discouraged. These are just some of the most common forms of credit. There are other ways to finance yourself. Do not forget to check with your bank or a specialist to find the model that best suits your needs.