4 Alternative Ways to Fund your Business

Do you have entrepreneurial spirit, an idea that could potentially disrupt the market or a reason to believe your product could be the next big thing? If you have already transformed this idea into a business, you may be worried that your budget is already stretched and you don’t know where else to turn for capital.  Many entrepreneurs, however, have actually funded their business ideas using less traditional sources.

Here are four alternative ways to help fund your business when traditional methods aren’t working.

1. Crowdfunding

In short, crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.  It can entail using platforms like Kickstarter to find investors from all over the world.  The more investors you have means the less cash each one has to provide to get your business off the ground.

2. Search for government grant opportunities

Sometimes, nonprofits and local governments offer economic development grants directly to small businesses. The benefit of funding your business with grants is that, typically, they do not need to be paid back.

3. Ask friends and family

Founder and CEO of Startup Professionals, Martin Zwillig, says most investors believe that the entrepreneur selling the idea is more key to business success than the idea itself.  Zwillig says investors look for evidence that people who know you well are willing to bet on you, even before your idea has a chance to show traction. The reality is, entrepreneurs have been going to friends and family for money for years to start and expand businesses. When doing so, Zwillig suggests you set the same ground rules you would for any other investor.  Create a sound business plan, put your deal in writing, and keep the lines of communication open.

4. Pitch to a venture capitalist

If the bank won’t agree to give you a loan, or the interest rate is ridiculously high, seeking funding from a venture capitalist or an angel investor may be a viable option.  A venture capitalist is someone who distributes third-party funds into new, early-stage ventures. An angel investor is someone who invests in companies with their own capital.

It’s important to note: the type of business you’re starting also influences the likelihood that angel investors and venture capitalists will be willing to give you funding.

For example, Toronto venture capitalist Mark Attanasio says his firm, Hillcrest Merchant Partners, has no real interest in investing in companies that are creating me-too types of products and are trying to compete with other providers who also are creating me-to types of products. They want to nurture the companies creating real solutions to real, difficult problems in the world.

Having an idea for a company or start-up is a great start, but securing the money to fund it can be the hardest part.  Though it can be a long road to success, finding investors and capital along the way will make all the difference to keeping your business afloat.  Good luck!

neOadviser