Business Expansion and Creative Funding Options

All too often entrepreneurs with cutting-edge ideas give up their dreams when they realize the venture capital boom of the 90’s has gone the way of the dot-coms it once funded. Others who manage to get past the VC dilemma are often discouraged by how difficult (or impossible) it is to qualify for a traditional bank loan.

The good news is that every day, entrepreneurs keep dreams alive by finding unusual ways to obtain the funding they need. Funding that helps create momentum to grow a viable business (which may eventually catch the attention of a venture capitalist or two).

If your business plan is burning a hole in the proverbial pocket, consider an alternative.

Private Lender

Not to be confused with VC or angel investors, private lenders tend to fund what corporate banks consider high-risk projects. Aware of the risk-reward factor that any startup poses, a private lender favors ideas with a solid business plan and experienced professionals at the helm.

Many private backers prefer to fund businesses that fall into a specific category or industry – usually an area they themselves have a background in. It may be worth investing some time to locate a lender who has an interest in your niche as they tend to be open to structuring creative and equitable repayments on loans.

Self-Funding

You don’t need hundreds of thousands of dollars to put an idea into motion. In fact, many new businesses begin with self-funded capital as low as $10,000.

There are two main reasons to consider self-funding a startup project:

Entrepreneurs who don’t want to spend countless hours hunched over their computer creating and preparing an investment pitch deck, then going “door-to-door” with the proposal should consider self-funding.

Oftentimes this is the last resort, especially for entrepreneurs rejected by more traditional funding options due to poor credit. According to a report from the National Small Business Association (NSBA), credit cards are one of the top sources of short-term capital for startups and SMBs.

Crowdfunding

The concept of crowdfunding began as a way for creative artists to fund projects with online donations from fans. It is now a popular option for all types of innovators seeking financial backing for their startups. Online platforms such as Indiegogo and Kickstarter led the way for organizations like Fundable which provide equity crowdfunding solely for entrepreneurial business endeavors.

Although crowdfunding is not for every startup --- the business must offer a tangible product --- someone looking for immediate upfront funding would do well to consider this as a viable option.

Research from the Small Business Administration’s (SBA) Office of Advocacy found that raising seed money via crowdfunding encouraged a second look from VCs. The report states “Startups that raise more money crowdfunding are more likely to receive external financing,” to the tune of a 50% probability for startups raising 1 million dollars through their crowdfunding efforts.

Don’t allow financing limits to constrain your startup’s potential. By finding creative ways to raise capital any idea can become a reality. There are a surprising number of companies you’ve probably heard of that started by dipping into their own savings. Many of these are now valued in the millions.

Did you take advantage of any of these methods to finance your startup? Do you have another creative solution to obtain financial backing? Share your thoughts in the comments below.