Small Business Funding Options
Many small businesses need funding to get started or to grow, and sometimes lots of it. While seeking out funds for your small business can feel daunting, know that you have several options available to you. We’ve put together a list of some of the different types of business funding for your startup or small business.
Family & Friends
Relying on the people who believe in you most can be a good way to start. If you can show your family members or close friends that your idea can and will be successful, you can certainly go to them for help with accumulating funds for your business idea. It’s important to remember, however, that if you do accept money from them, they deserve to be treated like any other investor. They might be an uncle or parent, but they’re also a partner in business. Keep them up to date and involved in your progress.
This is a kind of financing that comes from investors who see potential long-term growth in your business or start up. This money is typically drawn from pooled funding. While the possibility of returns draws them in, they realize they may be taking a big risk. This can lead to them being a part of the decision making of your business, and even part owners, so keep that in mind.
There are several venture capital firms in Grand Rapids, who usually have different types of businesses or industries they invest in. You’ll find they all have different criteria for evaluating those investments too.
An angel investor puts funds into startups or businesses in early stages. They focus more on helping get a startup going rather than on long-term returns. In contrast to a venture capitalist, an angel investor typically uses their own money when injecting funds into a startup they hope to help succeed. This is why they are called “angel.”
This is a way to raise funds, mostly through social media and online platforms. Crowdfunding, through sites like Kickstarter or local sites such as Payit2.com, allows your small business to gather small investments from several people.
Odds are you’ve heard lots of stories about incredible Kickstarter campaigns where startups exceed their goals by tens of thousands of dollars or more. However, there are many who do not reach their goal.
Local Pitch Competitions
Dolphin Tank (submissions due 5/31/17) and monthly 5×5 Night events are just a few local examples of pitch competitions. These contests give you a platform to pitch your business or startup idea in front of a panel, and the opportunity to win prize money.
You can also often meet representatives from different venture capital firms at pitch competitions. And, keep in mind that if you do participate and give your pitch, you will get valuable feedback from the judges that will help you further hone your pitch.
How can you get people to support your startup idea?
Most of the funding types mentioned above are all about getting people to understand your business and your potential, and getting them to connect with your story so much that they want to support it financially. That has risk involved. If you’ve ever watched Shark Tank or The Pitch, you’ve probably seen where the investors comment on the excitement and passion (or lack thereof) from the entrepreneur.
Understanding your story, your business idea, and how you’ll make money to grow the business and pay back investors should all be conveyed quickly and effectively. Take time to create this story, this pitch, and practice on friends and family beforehand.
Small Business Loans
This is one of the most common methods of funding for small businesses. Loans, whether a car loan, mortgage or business loan, require a detailed application and approval process. After all, banks are a business too and they also consider the potential for the payback of the loan. Luckily, we have many great lenders through banks and credit unions in West Michigan. If you’ve tried this path but have not had much success, then a microloan may be what you need.
Microloans from GROW
Microloans are small loans from organizations like GROW that are funded from national, regional, and local sources. Our microloans range from $1,000 to $50,000 and may be used to purchase needed business equipment, supplies, materials, inventory, working capital, or removable leasehold improvements. The loan itself is just half of GROW’s microloan program. We make sure you have the support you need to be successful as a business owner, so we follow up with you regularly to see how we can be of assistance and to connect you with other resources that will benefit you as a business owner.
We have also received our Community Development Financial Institution (CDFI) designation for our microloan program. This CDFI designation further helps us provide financial services to meet the needs of economically disadvantaged individuals.
There are many ways to get the money you need to start and grow your business. There are others who may use their own savings or “bootstrap it” by using the money the business makes and doing it themselves. Every entrepreneur is different. We’re here to provide you with the right resources to inform, educate, and empower you to start, build, and grow your business.
On June 22, please consider attending GROW Connects: Show Me the Money, which will center around business financing options and how to approach banks and micro lenders.