{"id":7998,"date":"2020-04-02T15:32:30","date_gmt":"2020-04-02T19:32:30","guid":{"rendered":"https:\/\/web.uri.edu\/risbdc\/?p=7998"},"modified":"2020-04-21T15:12:49","modified_gmt":"2020-04-21T19:12:49","slug":"10-ways-to-finance-a-small-business","status":"publish","type":"post","link":"https:\/\/web.uri.edu\/risbdc\/10-ways-to-finance-a-small-business\/","title":{"rendered":"10 Ways to Finance a Small Business"},"content":{"rendered":"
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You may have a fantastic idea for a small business, but without funding, it\u2019s stuck in the hangar. Bootstrapping\u2014financing your business using cash flow\u2014can get those wheels moving but at some point you\u2019re likely to need an infusion of cash to launch, keep the doors open, or grow. Luckily, there are many options to acquire the capital you need and no matter your model or industry, you can find the right options to finance your small business and see it soar.<\/p>\n

Every business is unique. Not every option described will be a good fit for your small business, but for every option you will need a strong foundation in the form of a solid business plan or excellent business health with a successful track record.<\/p>\n

Common ways to finance a small business include:<\/p>\n

1. Traditional loans<\/p>\n

This refers to financing through traditional banks, generally the brick-and-mortar institutions with a branch in your neighborhood. These institutions are a large source of small business funding, but they are unlikely to loan 100% of the money you need. You will need to come up with a portion of the money on your own, from other sources. Your likelihood of obtaining a loan from these sources depends on many factors, including your relationship to the bank, your personal credit history<\/a>, and what other debt you hold. Read more here about 8 steps to landing a small business loan<\/a>.<\/p>\n

2. Alternate lenders<\/p>\n

While there\u2019s no strict definition of an \u201calternative lender,\u201d we can start by describing them as \u201cnon-bank lenders.\u201d Some are entities that focus on community development (and are backed by the SBA, CFDI, or other trustworthy institutions). Others are less-regulated internet lenders promising quick cash. Check out our FAQ on alternative lenders<\/a> to learn about the options and how to vet them.<\/p>\n

3. Self-funding<\/p>\n

For purposes of this overview, we\u2019ll define \u201cself-funding\u201d to mean any option where you are putting up 100% of the money yourself, or have an otherwise massive stake in the game. This includes your own savings, credit card funding, or a home equity line of credit. While it can be an easy and quick way to get money, it also exposes you and your family to the most risk. If the business fails, you could lose your home or life savings.<\/p>\n

4. Crowdfunding<\/p>\n

Crowdfunding has gotten quite a bit of buzz recently, with many businesses boasting lucrative success stories. And while crowdfunding is a legitimate path for some businesses, it requires a hefty investment\u2014and a little luck\u2014to be one of those stories. Keep your goals tangible and modest, and expect that you will need to heavily pre-promote your product and achieve some early \u201cwins\u201d in order to achieve your goals. Read about 11 elements of a successful crowdfunding campaign<\/a> here.<\/p>\n

5. Grants<\/span><\/p>\n

There are a remarkable number of grants that exist, but also a remarkable number of restrictions surrounding each one. As a rule they are very targeted and very competitive, and despite the title of this blog post listing small business grant ideas<\/a>, we caution that there\u2019s rarely such a thing as free money. You may also find grants through the Small Business Technology Transfer (STTR<\/a>) program. Ask your business counselor if this might be a good program for you.<\/p>\n

6. Private investors<\/span><\/p>\n

Retired or wealthy industry professionals may be willing to invest in your business. One important question to ask if you\u2019re considering taking this approach is whether you are willing to accept their advice. This can be done through an advisory board as a channel for the advice, and the investor\u2019s role, oversight, and stake should be clearly outlined prior to accepting funding.<\/p>\n

7. Strategic partnerships<\/span><\/p>\n

For industries where larger players are open to supporting smaller ones, a strategic partnership can be win-win. Many biotech firms are funded through partnerships with other drug firms. For example in the drug industry, a company like Pfizer may choose to invest money by buying the rights to certain research, or a drug in development.<\/p>\n

8. Angel investors<\/span><\/p>\n

Angel investors, who can invest individually or as a group, come in at an early phase to get your company off the ground. There is generally a quite rigorous screening process before you would be invited to make a pitch. There\u2019s no set range, but $50k-$500k is typical. Angel investors have an eye to the exit strategy: they want to know how they\u2019re going to get money out of the deal, and aren\u2019t looking to be involved for the long haul. Cherrystone Angel Group<\/a> in Rhode Island is one of many groups around the country.<\/p>\n

9. Venture capital<\/span><\/p>\n

VCs are generally looking for big players\u2014a minimum investment might be $5 million. Some may go lower, but if you don\u2019t need an infusion of that much cash, you\u2019ll likely be looking to work with one of the other sources listed. VCs typically stay involved longer, and are generally looking for equity or convertible debt, though the terms are all highly negotiated. In many cases, investors may require terms that allow them to bring in their own CEO, or to take over your company if you don\u2019t meet set goals.<\/p>\n

10. Friends and family<\/span><\/p>\n

Often people you love have a unique combination of faith in you and wanting to see your business soar. Obtaining financing from friends and family can be an informal crowdfunding model, and it needs to be as equally thought out. It may come as an early inheritance, a loan, or a generous gift. No matter the form, it\u2019s critical to put all of the details and expectations in writing. And hold to the tenets of good business: don\u2019t execute your business plan until you have full funding. It may be tempting to move forward with a gift of $50k from a generous aunt, but if your business requires $100k to be viable, you\u2019ll fall short no matter how good the intention. In every transaction, imagine how it will impact Thanksgiving dinner for years to come.<\/p>\n

Are you ready to move forward? Schedule an appointment<\/a> with one of our business consultants to talk through your options, get your business (or business plan) into healthy shape, and prepare a successful campaign or application. Get flying!<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

You may have a fantastic idea for a small business, but without funding, it\u2019s stuck in the hangar. Bootstrapping\u2014financing your business using cash flow\u2014can get those wheels moving but at some point you\u2019re likely to need an infusion of cash to launch, keep the doors open, or grow. Luckily, there are many options to acquire […]<\/p>\n","protected":false},"author":701,"featured_media":8000,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[44],"tags":[],"class_list":["post-7998","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"acf":[],"_links":{"self":[{"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/posts\/7998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/users\/701"}],"replies":[{"embeddable":true,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/comments?post=7998"}],"version-history":[{"count":2,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/posts\/7998\/revisions"}],"predecessor-version":[{"id":8004,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/posts\/7998\/revisions\/8004"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/media\/8000"}],"wp:attachment":[{"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/media?parent=7998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/categories?post=7998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/web.uri.edu\/risbdc\/wp-json\/wp\/v2\/tags?post=7998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}