Guest Post by Mitchell Steele
If you own a small business or you’re looking at starting one, you know how important it is to keep your personal and business finances separate. We’re dedicated to helping you keep your personal finances in shape, but you can’t do that if you’re constantly dipping into your money to keep a business afloat. Solid funding and good cash flow play a major role in how successful your business can be. Since the financial crisis, however, banks are severely limiting their involvement with small business financing. Read on to find out more about alternative financing options and how you can take advantage of them.
For Existing Businesses
Funding Circle is one company that implements new lending standards. Private investors decide who receives their money. In return, they gain high, stable returns while creditworthy businesses obtain low-cost financing that helps them grow. According to Laura McMullen, Head of Sales at Funding Circle, “Intermediaries now have an opportunity to generate the funding their clients need, quickly and with the minimum of bureaucratic obstacles.”
Another option for existing businesses are invoice sales. When a business has an unpaid client invoice, they can sell it for cash. The advance they receive pays for equipment upgrades, vehicle repairs or any other expenses. When the client pays the invoice, the company receives the balance of the invoice minus a small fee. MarketInvoice is one company giving business owners the chance to raise short-term financial funding. Business owners receive the cash they need with limited risk.
Similarly, companies like www.businesscashadvance.com provide funding based on projected income. If your company processes payments via credit card and accepts a minimum amount of income monthly, you can qualify for funding.
Instead of relying on centralized loans with little accountability, microfinancing is increasingly popular for starting a new business. Crowdcube allows anyone to be an investor. After providing money to a business, investors receive equity from the company. Everybody wins as the entrepreneurial spirit supports business owners and the private sector.
Another popular microfinancing, or crowd-sourcing, platform is Kickstarter. Britta Riley of Windowfarms found success raising the $200,000 needed to get her business off the ground by splitting her fundraising into two campaign phases to keep momentum high and create attainable goals for her and her investors. She obtained the funding she needed and gained investor confidence.
The more people invest, however, the more accountability you will have. Consider how your investors feel. Are they satisfied with your business model? Do they feel valuable? Is the goal attainable? When you pay attention to the psychology of your investors, you increase your chances of obtaining funding your business needs.
Tips for Success
Finding the right funding sources for your business will be time-consuming. Don’t expect to pick up the phone and gain all the money you need in a single day. With that fact in mind, prepare a solid business plan. Investors won’t give you money if they suspect your business will fail. Paul Lightfoot of BrightFarms counsels new business owners to “feel out your business plan” and prove that you are capable of turning a profit.
You know the language of your business specialty, but you also need to learn the language of potential investors. They want to know that you understand the financial aspects of business ownership and that you’re interested in them, not just their money. Likewise, learn legalese so you understand basic contract structure when you’re ready to make decisions. You know what’s best for your business so learn the language that gets you where you need to go.
You can’t rely on traditional funding for your business, but alternative options exist. Use your entrepreneurial ingenuity to think outside the box. Research available options and make decisions based on what’s best for your business’s future success. And don’t forget to keep your personal finances completely separate from your business!