Four sources of financing every small business needs to know
Updated: Nov 9, 2021
A small business with no revenue, no track record and no sales screams high-risk. Luckily, there are other pockets to pick to help your small business get the financing it needs to grow and thrive.
1. Friends and family
Contacting your closest connections is a crucial investment move for small businesses. While friends and family tend to be one-off investors, they can prove to be a good resource. The cleanest way to go about it is to ask for a loan with a promissory note stating repayment terms. Or give a slice of ownership and offer straight-up equity.
2. Bootstrapping
It’s the least sexy approach of the bunch, and it barely gets any spotlight. Bootstrapping is do-it-yourself financing that requires rigorous budgeting and operating on minimal costs before taking any outside capital.
3. Credit Unions
Banks deal with cold, hard numbers, which is why so many entrepreneurs get the cold shoulder. “Banks don’t invest in ideas. They want a product and a business,” says Evans. Alternatively, look to credit unions, which actually outperformed all the banks when it came to meeting the financing needs of small- and mid-size businesses.
4. Angel Investors and Venture Capitalists
Somewhere in the world, there is a high-net-worth individual who wants to give you money, even if you don’t have any yourself. These are the angel investors and venture capitalists who invest anywhere from $10,000 up to $20 million in ideas. There are also angel groups that help facilitate co-investments with multiple angels, or arrange syndicated investments with other angels and venture capital providers.
