5 Ways to Finance a Small Business

So, you have the next million dollar idea but need to find a financing method to make it happen? This issue happens to be one of the largest headaches for any striving entrepreneur. After crunching the numbers and determining you don’t even have nearly the amount needed to start your small business dream, what are you supposed to do? Well sadly, many give up at this point because they don’t want to undertake such a burden by having it placed on their shoulders, but the strong and determined entrepreneurs find a financing solution and move forward.

 Financing is critical for any small business; it’s the major player of the game. There are a lot of choices available out there, but you have to find the one you feel comfortable with and are willing to endure. To do this you must have a plan and stick to it because if you have no method, no structure for obtaining financing, you are going to end up diluting your dream. Here are five common ways other dreamers have financed their million dollar ideas:

1.      Tapping the 401(k) – Depending where you are in life, this might be an option for you to look into. Unemployed and thirsty for success, you can set up your small business as a C-Corporation enabling you to rollover your 401(k) into your company’s new retirement plan. Then with a few strokes of the pen, you can swap stock for funds in the retirement plan. It’s a risky business depleting your retirement nest-egg, so it is highly recommended to consult a CPA and Financial Advisor to help with this process.

2.      Bank Loans – Economic turmoil has strengthened restrictions on lending, but several institutions have set aside certain amounts for small business lending. A great example is Bank of America.

3.      Government Funding – Does your small business fall under the government’s definition of a small business? Was your loan request you turned down by a bank or other lending institution? If you answered yes to these questions, you might want to try obtaining a loan through the Small Business Administration (SBA).

4.      Crowdfunding – Is your idea something you think the general public will love? If so, crowdfunding might be your answer. Crowdfunding is a collective way individuals can pool funds together to reach a financial goal. Sites like Kickstarter, GoFundMe, and Indiegogo are popular crowdfunding platforms.

5.      Angel Investors – Have the nerves and presentation skills needed to pitch your idea in front of an investor? Well, then what are you waiting for? Get on it! Angel investors are venture capitalist, they have the capital you are looking for but it will cost you; typically, a portion of ownership in your company.

The five financing methods listed here are just some of the common financing methods available to entrepreneurs. If you have a great idea, don’t let it rest in your head collecting dust. Pick one of the many financing methods, and watch your baby grow! If you are even looking for some advice or mentoring, groups like local SCORE chapters, offer free services.