By: Jessica Galbraith
You can have the best start-up idea in the world, but without the cash to back it that business will never get off the ground. Financing a start-up business, especially if you have no previous track record, usually requires a solid business plan and a lot of patience waiting for an investor to bite. Thanks to the internet there are now more financing options for budding entrepreneurs than ever before. If you are ready to take your brilliant idea to the next level, here are five tips for financing your business.
1. Apply for a Small Business Loan
Getting approved for a small business loan is notoriously difficult. Despite the upturn of the economy, banks are still uneasy about lending to anyone who isn’t a sure thing. While some entrepreneurs think that bank loans are next to impossible, you can give yourself a fighting chance by preparing thoroughly and covering every scenario in your proposal.
Another option is a government backed loan through the Canada Small Business Loan Program. To qualify, your small business must be for-profit, not in the farming sector, with an annual revenue of less than $5 million. Find out more about this program at the Industry Canada website.
2. Research Available Grants
Many people don’t consider grants when they are looking for financing, which is unfortunate since unlike loans, grants don’t need to be re-paid. The criteria for grants can be very strict and extremely niche specific, but if you aren’t in it – you can’t win it.
The Centre for Small Business Financing has an excellent search tool that can show you the available funding in your local area. There are grants for first time business owners, women entrepreneurs, immigrants and Aboriginals. Take the time to find one that you qualify for, and you may just get some free money thrown your way.
3. Kickstart it!
It may still be a slightly unconventional method of financing, but crowdfunding continues to grow in popularity amongst entrepreneurs, philanthropists, and small business owners hoping to get their big break. Websites such as Kickstarter and CrowdCube allow you to cut out the middle man, lay out your proposal for the public, and let them decide whether or not to fund your campaign.
Simply throwing out your idea on a crowdfunding website will likely result in no funding. Your online investors will want to see a well thought out proposal with a clear goal. Create a landing website, blog, social media campaign, and get creative for that financing.
4. Enlist Investors
If you have the contacts, traditional investors are always an option. Convincing an investor that you are a worthwhile risk for their hard-earned money may be easier said than done. Clear objectives, organized finances, and preparation is key. Be sure to avoid these five common mistakes during your pitch.
5. Use Those Assets
Approximately 68% of small businesses are funded by the business owner themselves. Chequings, savings, bonds, and even home equity loans are common sources of small-business financing. This article ‘Expert Interview with Michael Kitces about Financial Planning‘ is a fantastic resource on organizing your finances and considering enlisting a financial planner. You can also use your 401K or IRA savings account as a loan option, but there are major penalties for not paying it back in the required timeframe.
No matter what type of financing you choose for your start-up business, preparation and patience are key. Don’t rush the process, cover all your bases, and before you know it, your business will be off to a successful start.
Jessica Galbraith is a writer and author of the travel blog The Fly Away American. You can connect with her on Twitter at @flyawayamerican.