Starting (or growing) a small business in 2022 is going to take a lot of capital, and in the current economic climate, some ways of raising money are certainly going to be more effective than others. Whether you’re bootstrapping and need to raise money to get your business off the ground or breaking ground on a new location, you have several different options you could take.
In this article, we’ll look at some of the ways you can raise money for your small business; finding a small business loan, connecting with investors, and crowdfunding. Read on to learn more about each option, and decide which is right for you!
In this article, you’ll discover:
Find a small business loan
When looking for capital to start or grow a business, the first avenue many small business owners might think of is applying for a loan through a bank or a small business administration.
Bank loans and small business association loans are a great option for small businesses, especially those that are already well established. They often can loan large amounts at once, making it a steady source of capital for your capital projects.
However, small business lending in traditional banks has been on a steady decline for several years now, even before the pandemic. Small businesses, and especially businesses in low-income neighborhoods or owned by minorities, are having an increasingly difficult time getting small business loans.
Furthermore, the kind of small business that is more likely to get a small business loan is often one that’s been around for a while. Most banks won’t lend to a business that hasn’t been in operation for less than two years, meaning this might not be a viable option for a small start-up business.
That being said, there are also several obstacles to finding a small business loan that you should be aware of, including your business’s age, credit position, and industry.
Raise money for your small business by finding investors
Another way you can raise money for a small business is by looking for investors to support you! This is actually more common than you might think - investing isn’t just for the Warren Buffets of the world.
In fact, many small businesses that are raising money hold a “friends and family round” of funding, where they ask people in their inner circle for their support of their business. This sometimes is more informal, but it’s generally best practice to draw up a term sheet and go through the legal motions just as you would with any other kind of business contract.
There are many different types of investors - some are looking for equity, others debt financing. If you have equity investors, they’re going to want a portion of your profits, and possibly a say in how your business is run. Debt investors, on the other hand, just offer a loan that you pay off in interest.
There are several ways to find investors. As we mentioned before, you can run a friends and family round, or you could look at industry contacts who might be interested in investing in your business, or maybe a hobbyist in your field who might not want to take on the work of running a business, but still wants to be a part of one.
One of the great things about having investors in your business is that they often not only provide much-needed capital, but they also become some of your small business’s most important advocates. Investors will obviously want to support their investment in the ways they can, whether it’s by shopping or dining at your business themselves, or connecting their social circle with your business in whatever way they can.
Another great way of connecting with investors is by running a Honeycomb campaign! Honeycomb’s unique crowdfunding model turns your loyal customers into investors, for as little as $100. Plus, because it’s a debt crowdfunding platform, you don’t give up equity or ownership, yet you benefit from those intangible perks of having investors who advocate for your business.
Find out more about Honeycomb’s unique crowdfunding platform and how it can help you raise money for your small business by connecting you to investors!
Raise money for your small business’s growth with crowdfunding
Not just for raising money for a new bridge in your town, or to support a family in a medical crisis, crowdfunding holds a lot of potential for small businesses looking to raise money for their growth.
Most people are familiar with gift or reward crowdfunding, which is what platforms like GoFundMe or Kickstarter do. Essentially, a small business puts their project up on one of these platforms and asks for donations from their supporters. Sometimes, the business might offer perks for different levels of contributions — such as, kick in $100 and get a t-shirt — but there’s really not an equal exchange of resources.
Some small businesses struggle with this kind of crowdfunding. Either they don’t get the results they need because people don’t have incentive to pitch in money, or they’re hesitant to even think about crowdfunding because they see it sort of as digital panhandling.
However, that doesn’t necessarily need to be the case! Debt crowdfunding is a relatively new model of raising money for small businesses, in that it only became legal with the JOBS act in 2016. With the easing of SEC regulations, unaccredited investors could finally support small businesses they believe in, and crowdfunding platforms like Honeycomb make it easy for them to do just that.
Crowdfunding capital for your small businesses has benefits that go far beyond just raising money, too. We’ve already established earlier that it strengthens your relationships with your customers-turned-investors. Honeycomb campaigns also typically receive a lot of marketing buzz - they can even garner press attention, too!
Finally, we’ve seen that this combination of capital, customer relationships, and marketing buzz has helped small businesses thrive even after their campaign reaches its end. On average, Honeycomb alumni see a 60% year-over-year increase in revenue.
Allow community capital to take your small business to the next level
There are many different ways to raise money for your small business. You could apply for a loan from a bank, solicit investments from your social circle, or you could combine these ideas with the power of crowdfunding to power your business’s growth.
Learn more at www.honeycombcredit.com/grow, and sign the form below to receive more information!