in: Business Strategy
by: Karen Kobelski
Karen Kobelski is a member of the executive team at BizFilings – an online incorporation provider. She’s routinely asked about finding funding – how to do it and where to look. We wanted to help you cash in on her advice! Here’s what she had to say...
Finding funding is a surefire way to make your business grow, or give a new business a jumpstart. The good news is that I have lots of advice for aspiring (and current!) entrepreneurs who want to learn more about finding and applying for funding. Whether you have a million-dollar startup or just a million-dollar idea, I’ll use the articles in this series to tell you where to look for funding andhow you can best position yourself to get it.
The good news is that there are quite a few places to get funding — many of which are frequently overlooked.
Pulling up the Bootstraps
If you have used savings and other personal funds as you got started (or plan on it), you’re not alone — many entrepreneurs use “bootstrapping,” which refers to financing a company by scraping together any personal funds available. Bootstrapping typically includes tapping into any home equity lines you may have, along with credit cards and savings accounts. If you’re truly passionate about your business plan and idea, you may be able to leverage your home against a business loan — or perhaps you have some other investments that you can utilize to get funding.
One thing to note about bootstrapping, while some use credit cards to get their business off the ground, overwhelmingly this isn’t a great option — and research has shown it’s even less beneficial for women. Recent reports have shown that women are more likely than men to open a credit card for business purposes, and are less likely to pay it off. If you must use credit cards, be smart about what you’re using them for — and have a payment plan in action before you start.
Business credit cards can work, however — you must be savvy enough to know how to manage your credit, and to reach out for help if it spirals out of control. Now, what happens when you’re all out of your saved pennies, tapped out the credit cards, and are at the proverbial end of your shoelaces from bootstrapping?
Start With the Basics
After you’ve exhausted your own resources, you may want to look to those nearest and dearest to you before looking at external sources. While she’s probably not in a position to finance your entire company, Cousin Jenny may be impressed enough with your new children’s clothing business to toss you a few hundred dollars to help you get rolling (not to mention signing up to buy some of your clothes for her growing brood). It can feel uncomfortable to ask friends and family for money — but keep in mind, if you’re truly passionate about your company and have a solid business plan (more on that in a second), it’s more of a business deal and less of a favor.
So, what about that business plan? Before you ask your friends and family for money, you should have a well-researched one at the ready. This way, you can explain to them exactly what you’re selling, what you plan on charging, how you’ll make money, and whether you’re asking for a loan, an investment, or a gift (i.e., whether or not they should expect to get back any money they put into your business, and if so, how much). There are quite a few places that you can look if you’re writing a business plan from scratch — head to your local library or bookstore to find some examples and templates of how you might set up your own plan.
Now — you’ve cashed in your change jar, figured out your perfect business plan, and have asked your friends and family to help get you off the ground. What’s next? Check back in later articles to learn about broadening your horizons.
Until then, good luck!