Crowdfunding and other startup financing opportunities
If you’re using credit cards and family loans to open your business doors, you’d better think again. Opening even a modest business with modest goals takes a bunch more money you have in your wallet.
Between permits, licensing, rental fees, taxes, and more, a startup takes a bundle. But, crowdfunding can open new doors for you and your plans.
Bank financing tradition
Many banks focus on making and servicing business loans. They are a reliably secure investor with the experience to finance and partner with small business. With minimum Fed interest rates, banks have more money nowadays, but since the recession they work under more restrictions.
It’s in the bank’s interest and yours to do extensive planning, and that will drive you to understand business and market operations better.
Bank interest rates are certainly better than credit cards, so what you have to seek bank and legal advice on is the value of debt financing as opposed to other funding sources.
Venture capital option
Venture capital investors release millions to entrepreneurships with high-growth and high-risk potential. And, to secure their investment, they will provide structured advice on management for success.
Venture Capitalists provide a small core of big investors and can form a lasting mutually beneficial venture. But, for some entrepreneurs, that’s a lot more control than they want.
Business News Daily, quoted Brian Haughey, the Director of the Investment Center at Marist College, “venture capitalists have a short leash when it comes to company loyalty and often look to recover their investment within a three- to five-year time window.”
SBA 504 loans
The Small Business Administration offers long-term, fixed-rate loans to new but established businesses to find a new facility or buy equipment necessary to growth.
TheSBA’s Certified Development Company (CDC) /504 Program helps businesses move to the next level, but there are limitations on the use of the money loaned.
In practice, the SBA 504 pays 40% of a projected cost up to $5-million, and the loan is granted. guaranteed, and administered by an SBA Certified Development Company.
Angel investors opportunity
Some individual investors are dedicated Angels. They invest smaller amounts than Venture Capitalists, but they are less intrusive in the business operation.
What they want is equity in the business, and depending how the equity is written, it may continue through the business’s life or be bought back by the business owner in time.
According to Forbes, Angels Investors are likely to commit to $25,000 - $50,000, much smaller than Venture Capitalists put in, but that’s enough for many a small business to get off the ground especially if they have a well thought out plan and a targeted need.
Crowdfunding through social media
Crowdfunding turns investment options upside down, soliciting small contributions from a larger investor base found through the universe of social media.
If you can target the right audience on the web, you can secure donations of any amount in a seamless user-friendly payment process.
Basically, you create a pitch for your cause at a crowdfunding website, and launch a connection with friends and social connections urging them to donate and to forward the campaign to their online networks
According to Sara and Josh Margolis, the co-founders of Plumfund.com, you want to thoroughly examine the fees and other costs to you in crowdfunding and other ways to raise money.
You make the call - with help!
Any fundraising effort needs serious planning and good advice. You need to get input on whether debt or equity funding is the way to go. But, those same advisers might help you explore the crowdfunding option helping you to prepare, market, launch, and follow-through.
Whether you are looking to open a simple mom-and-pop restaurant or retail store, to bring a new hi-tech unicorn to market, or to take a plunge into the micro-business world, crowdfunding can open those doors for you.