Raising money for your business is one of the first steps to turning (or keeping) the lights on, paying employees, and making your product. For many business owners, funding their venture is top of mind. It can also be a stressor. Here are a few key ways you can raise money to run your business:
Friends and family
Depending on your personality and your family, this may be the easiest or hardest way to raise money.
In 2010, 5 percent of Americans provided personal money to help fund someone’s business. Of that group, 32 percent gave money to a friend or neighbor, 26 percent gave money to a close family member, and 11 percent gave to another relative, according to a survey by the Global Entrepreneurship Monitor.
Even when asking your friends and family for money for your business, you want to treat it like you’re asking a big-time investor you don’t know.
To get started, write down your pitch. This is important to persuading your friends and family to give you money. While you don’t need a 50-page business plan, you should still highlight key points about why investing in you and your business is a good idea.
Then, decide if you’re accepting it as a gift, donation, or loan. This helps avoid future conflict and keeps expectations clear on both sides.
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Small business loans
If you are exploring a loan that is backed by a bank for your small business, consider a Small Business Association (SBA) backed loan. With SBA-backed lenders, you can get $500 to $5.5 million to expand and grow or start your business.
Do your research to make sure your lender has competitive terms that work in your favor. You should also explain to your lender what you plan to use the funds for, as some loans have restrictions on what the capital can be used for. A lender should be able to match you with a loan for your specific needs.
Even just a few years ago, it would seem crazy to have an average person — whom you don’t know — give you money online to start your business. But in the wonderful time that is 2019, raising money for your business through crowdfunding is a beautiful reality.
Sites like Kickstarter, iFundWomen, gofundme, and others help people fund other people and business ideas that they find inspiring.
If you want to create a crowdfunding campaign, start with some research. Look into sites and find out their campaign types, such as do they get equity, reward, etc. Then, find out the funding and payment processing fees you might be on the hook for. You also want to know what happens if your startup doesn’t hit its goal: Can you keep the funds raised, or is it all or nothing?
Then, be sure your campaign description is pithy but provides details about why your product is unique and needed in the market. You’ll likely also need interesting pictures or sketches to describe what your business does or sells.
Finding a great investor isn’t quite as easy as they make it look on Shark Tank, but it is a possibility for you when you put in the work.
Attending events and conferences relevant to your field can help you meet the right people. You can also apply to accelerators, which can help give you connections and support for the growth of your business.
In general, investors believe in the power of numbers. You need a good story to tell, but nothing convinces investors such as revenue models, your customer base, and your business’s budget. Having all this information in your business plan can help increase your chances of receiving funding from an investor.