4 Alternative Sources of Funding for Your Small Business
By Maura Ewing
True, it takes money to make money. But you don't have to have pockets lined with cash to start or expand a business. Nor should you put up collateral against your precious personal assets or max out your credit card to finance the business plan you believe in.
With a little creativity, business owners and entrepreneurs are finding the money they need on the terms that work best for their companies. Here are four sources to consider.
1. Look to the crowd
Do you have a small business with a devoted customer base, but not quite enough funds to expand or to launch a new product? Use that buzz to build a large network of small-scale funders through online crowdfunding platforms such as Kickstarter, Indie GoGo, and Profunder.
Once your business launches, you still keep 100% ownership and in most cases your investors hand over the money in exchange for little more than pride in your success (Kickstarter requires a small token of appreciation for investors like a little free product, and Profunder lets you design a plan around revenue sharing instead of equity).
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Flickr photo courtesy of AMagill, CC 2.0
2. Take your idea to an incubator
Business incubators are programs designed to support the success of promising entrepreneurs by partnering them with funders, industry mentors, and other resources to enable stable business growth. While some incubators get funding through ongoing grants or donations, most require an equity or profit share from member businesses or a flat monthly fee.
There are over 1,000 business incubators around the country. For example, Wayne University's Research and Technology Park in Detroit, TechTown, provides large workspaces and a competitive mentorship program to mostly tech-focused start-up companies. TechTown hosts over 70 growing companies, and has aided 85 innovative startups through its SmartStart business accelerator program.
Here are a few others to check out:
- If you run a tech startup: Y Combinator, TechStars
- If you run a food business: North Market
- If you run an arts business: Arts Incubator of Kansas City
- If you run a green tech business: Environmental Business Cluster
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Photo courtesy of TechTown.
3. Tap the corporate world
Many large corporations have funds and programs to invest in small businesses. What do they get out of it? Good PR and possibly a beneficial relationship with your business. For example, Huggies' MomInspired Grant Program offers $15,000 in seed money for start-up companies or original product ideas by mothers and designed to improve the lives of other mothers.
Or check out broader opportunities such as Intuit's Love a Local Business competition, in which three small businesses receive $25,000 Hiring Grant awards, with a chance to win the $50,000 grand prize. Find more small business grant opportunities here.
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Flickr photo courtesy of yoanimus, CC 2.0
4. Ask your city or state
While the federal government doesn't have much to offer in direct small business grants, local government agencies are often ready and able to lend a helping hand. State, county, and city development agencies have programs aimed to fund local business growth. They all share an overarching mission: to make their communities enticing places to live and work. By supporting local businesses, they aid economic health and bolster job growth -- both key ingredients to a community's quality of life. For example, in Jackson, Mississippi, businesses like Bolden Body Shop, Dress Boutique, and Smoothie Q Factory have benefited from the city's Small Business Development Grant Program, which has distributed nearly $80,000 in funds so far this year.