5 Creative Ways to Fund Your Business
Q: Steve, I heard you on a radio show talking about getting a new business financed, but I missed the details. My story is that I am pretty sure that my corporate job is going to be downsized in the next few months. I want to get ready for that now by starting a business part-time that I can ramp-up into something full-time. Money, of course, is an issue. What do I do?
-- Aaron
A: There are very few good things that can be said about the Great Recession, but one of them is this: There are a lot more ways to fund a business than there ever used to be -- necessity being the mother of invention and all.
So the money is definitely out there, but it is also hidden better than before. To help with this, I wrote a new book called "Get Your Business Funded: Creative Methods for Getting the Money You Need" (it comes out this week). In it, I share about two dozen different ways to find the money you need for your business, whether it is a startup or an existing business.
Here are my top 5 creative ways to get your business funded:
1. Business plan competitions: Both universities and communities at large have jumped on the business plan competition bandwagon, and the reason is essentially the same: It behooves them to find the best, most creative businesses out there. By having a contest and giving the winner funding, these competitions spur economic development and job growth. Winners get prize money and in-kind services.
Example: The Northeast Wisconsin Business Plan Contest is almost a decade old now and is intended to encourage startups in the region. The top prize is $10,000. There are many such contests all over the country. Google the terms "Business plan competition" and the name of your city or region.
2. Business incubators: Similar to business plan competitions, business incubators are regional entities that are similarly designed to spur economic development, but in this case they do so by housing nascent businesses in practically free space and giving them all of the services and amenities they might need to successfully launch their businesses, including
- Workspace
- Clerical and secretarial assistance
- Marketing assistance
- Networking opportunities and mentorship
- Legal, financial, and accounting help
- Access to financing partners, angel investors, and VCs
3. Crowdfunding: Crowdfunding is a relatively recent phenomenon, and one of my favorite new ways to get a business funded. The idea is that you raise a little bit of money from a lot of people (the crowd), but instead of paying them back as you would with a traditional business loan, you give them some reward instead.
In my book I share the story of Kieran Masterton who used crowdfunding to launch his movie platform, OpenIndie.com. OpenIndie is a site that lists various movies that people can find and bring to their neighborhood. Masterson figured aspiring moviemakers would love to be part of his site, so he turned to them to raise money for the idea: Invest $100 in the venture and in return, get listed on the site. 100 filmmakers liked the idea enough to agree, and Masterson raised $10,000 ($100 x 100 people).
Check out the crowdfunding site IndieGoGo.com.
4. Microfinance: Typically, when people think of microfinance, they might think about something like Pakistan's Grameen Bank lending a poor farmer $100 to buy a cow. But microfinance has come to the U.S. and is a great source for budding entrepreneurs, although in our case, there may be one or two more zeros tacked on to the amount. For instance, the Small Business Administration makes microloans for up to $50,000, although the average amount is $16,000. Other microlenders are Kiva.org and ACCION USA.
5. Banks: I say this is a creative solution because banks are lending far more to small business than you may think. Example: As part of its process of hiring 1,000 new small business bankers, Bank of America is working to increase the amount it is lending to small business.
So yes, the money is out there.
(Creative Commons Flickr photo courtesy of Willc2)