3 Sources of Financing for Start-Ups
It is well known that small business owners have trouble accessing capital.
According to an Accion USA survey, 90% of small businesses say availability of credit is a major problem. Startups face an uphill battle because they do not have an operating history. This is the main reason why lenders consider these companies risky bets.
This barrier may appear to be insurmountable but there are alternatives to traditional sources of financing. With a little determination and creativity, an aspiring business owner can obtain the capital they need to grow their business.
Here are three sources of financing for startups.
Pitch, or business plan, competitions are organized to bring together prospective entrepreneurs, angel investors, and venture capitalists.
Prior to the competition, participants are given the opportunity to work with mentors for help with their elevator pitch, business plan, and presentation. Entrepreneurs are given a platform to pitch to these investors with the possibility of obtaining a grant or an equity investment.
If you are building a business, it is a great opportunity to expand your network, refine your value proposition, and bring awareness to your brand.
Crowdfunding is a great way to raise capital. Entrepreneurs can use platforms such as KickStarter or IndieGoGo to present their projects to a large audience of potential lenders or investors. The process is pretty simple.
If you have a compelling product, create a campaign and validate your idea by putting it in front of thousands of people. Depending on your strategy, you can attract financing in a relatively short period of time. You can obtain loans from crowdfunding platforms like Prosper and Lending Club. Patreon, a rewards site, is also an attractive option for business owners.
There are how-to guides available on these platforms that will help you position your business for success.
According to the Opportunity Finance Network, “CDFIs, or community development financial institutions, are private financial institutions that are 100% dedicated to delivering responsible, affordable lending to help low-income, low wealth, and other disadvantaged people and communities join the economic mainstream.”
Unlike banks, many CDFIs provide technical assistance, including business plan development, accounting assistance, and financial literacy, to help businesses become sustainable. Organizations such as the New York Business Development Corporation (NYBDC) and the Community Reinvestment Fund (CRF) provide financing to help entrepreneurs obtain working capital, equipment financing, purchase owner-occupied real estate, and even acquire an existing business.
Finding capital to get your start-up off of the ground isn’t impossible. It will take work. If you have made a commitment to start and build a business, there is are many resources that are available.
By working with a business advisor who can help you develop and implement your strategy, you will have a greater probability of accessing capital and achieving your professional goals.