What Funding Alternatives Are There for Small Business Loans?
There are as many reasons to consider getting a small business loan as there are to not want to borrow money for your business. Maybe you’re just starting out, and don’t feel comfortable going into debt. Or perhaps you’ve been turned down too many times by banks that don’t want to invest in Main Street small businesses.
Whatever the reason, there are alternative ways to get funding for your small business. You can seek out grants, fund it yourself, seek out investors, or even get capital through crowdfunding! Read on for more detail on these different ways you can raise money for your business.
Financing made simple with Crowdfunding
With all the different alternatives out there to traditional small business loans, it can get a bit overwhelming. Honeycomb makes financing simple by offering fair access to capital and including an expert crowdfunding coach to help you through the process. Learn more about how Honeycomb can help you grow by filling out the form below!
Crowdfunding capital for your business can be another alternative to getting a small business loan from a bank, whether you choose to do reward crowdfunding or loan crowdfunding.
If you choose to crowdfund through a rewards platform like Kickstarter or Indiegogo, you can possibly finance the capital you need, but it’s often pretty difficult to do so unless you give compelling enough perks to people who contribute to your campaign. It’s also pretty much a one-way relationship, making your customers more of benefactors than investors.
Debt crowdfunding, on the other hand, is a great way to alternatively get a loan for your small business without dealing with a bank. Instead of taking out a loan from a bank, you’re lending from a crowd of your biggest fans and customers, who want to invest in your business, but not take any equity or ownership.
Crowdfunding has many benefits beyond just the capital you’re raising: you can strengthen your relationship with your customers, get some valuable press attention, and increase your revenue on average 60% after your campaign ends!
Small Business Grants
Oftentimes, you can find grants to help get a small business started up. These are especially relevant to entrepreneurs looking to start a business in a low-income area, or for someone coming from a socially-disadvantaged group.
There are many reasons to apply for grants when you can, because they are essentially funding you don’t have to pay back, making them rocket fuel for your new small business. They also can put you in good standing in your community, as grants often come from community development centers. If your business is seeking to bring something to your neighborhood to help make it better, a grant might be a great option for you to find funding!
The government is often a good place to start when looking for a grant for your small business. Grants.gov is an awesome resource for finding government grants. You can also check in with your local government’s economic development department and see if they have anything to offer and that you might be eligible for.
Self-Funding Your Small Business
If you’re more of a rugged individual, you might only want to rely on your own two hands for financing your start-up. That’s fine, many people choose to save up funding from another career to use in starting their own business.
However, self-funding can greatly restrict your cash flow for your business if you squirrel away every penny of profit you make. It also means it’s harder to make a contingency plan for difficult times (like, perhaps, a global pandemic).
Self-funding also puts more of your personal property on the line, and it means you miss out on some great opportunities that other forms of funding can offer you. For example, you’ll be giving up the potential for a relationship with an investor that could offer you valuable mentorship and advice.
Sometimes, you can find an individual or a group of people interested in investing in your small business. These could be people close to you, like family and friends, or they could be people already with industry experience who want to help support other entrepreneurs and make a return doing so.
An investor relationship can be a great alternative to getting a small business loan from a bank, because it’s more of a personal connection that can lead to many tangible and intangible benefits. For example, an investor will probably want to frequent your establishment, and encourage their social network to visit you as well, since your success is their success.
However, often investor relationships are equity investments. This means that they get a percentage of your profits, and might want to make some ownership decisions themselves. If you want to have complete control over your business, getting an investor might not be for you, unless they want to be a silent partner.
Start Your Business Journey on Solid Ground with Community Capital
You don’t have to go through a bank to get reliable funding for your business - instead, you can source it through crowdfunding. Your friends and family and most loyal customers are your most valuable resource when it comes to your business - why shouldn’t they be involved with helping to fund it as well?
Learn more about crowdfunding with Honeycomb Credit by filling out the form below!