Many of us have dreams of starting a business. Even those who have already started businesses sometimes need a little more cash.
In fact, I’m looking to fund a little project I’m working on right now (yes, shameless plug). The fact that I’m trying to raise a little extra money right now, for my business venture, has me thinking about the ways that business owners — and aspiring business owners — can raise the capital they need to make things happen.
Here are four sources of funding to consider for your next business project:
1. SBA Loans
One of the first things many people think of when they want small business funding is the government’s SBA loan program. In order to participate in this program, you have to apply for loans through a “regular” bank or credit union. However, the government promises to back the loan, so that the financial institution isn’t taking on all the risk.
However, even with this help from the government, it can be difficult to get the loan you need. Banks are still reluctant to lend, and you need to make sure you have an air-tight business plan for approval.
2. P2P Lending
Another option is P2P lending. Peer lending has become popular in recent years. You can ask strangers to help fund your enterprise. This can be a great option if you can’t get a more traditional loan from a bank. The interest rates are usually reasonable.
However, in order to increase the chances that you will receive full funding, it helps to share your plans, and how you expect to make your business work for you. Also, realize that if you don’t hit your funding goal, you won’t get any of your money.
You can tap into the help of the crowds with crowdfunding. This is a cool concept. Instead of lending you money, people give you money. However, you need to provide something in return. Offer a sample of your product or service, or you can provide other perks, like consultation, depending on what you have to offer.
Crowdfunding can be a great way to raise funds, get a little buzz going for your business, and provide you with preorders for whatever it is you are doing. Depending on the service you use, it might be all or nothing, though. Kickstarter is an all-or-nothing proposition, while Indiegogo allows you to choose to keep whatever you earn.
Once again, you need to be convincing in order to garner the funds you need to make your project a success.
4. Friends and Family
Finally, you can turn to friends and family to help you get the funds you need for your business. While borrowing from friends and family can be a little dicey, it might be your only option. To make this work, be sure that you make it a true business arrangement. Create paperwork and sign it. Pay interest (even if it’s a small amount). And make sure that you can show that you have a solid model and that you can repay the loan.
What do you think? Where would you turn for business funding?
Image: Aaron Patterson via Flickr