There are accessible options available to get scrappy and fund your company.
getty
Whether you are starting a new venture or are a long time business owner, capital determines whether your company moves to the next phase, plateaus or closes its doors.
When it comes to raising money, I am an advocate of options that allow maintaining 100% ownership and equity. However, bringing on a partner or investors may make more sense for you. If it does, be aware that VC funding is not nearly as accessible as people think it is.
The prevailing path most founders take growing an idea into a business is boot strapping. Business consultant Lori Williams says, “Startups today have a myriad of options, from traditional funding methods to micro lenders and online crowdfunding platforms. Whereas at one time, a business owner simply communicated with their local bank, today’s entrepreneur needs to be vigilant in researching various options available and piecing together a funding strategy.”
Though it isn’t encouraged, many use credit cards to get their company off the ground or to float their brand when needed. Making minimum payments on time is the baseline of using a credit card responsibly, but for a business, it is good practice to it pay down as much as possible to have that open line of credit when needed. Aside from credit cards, there are more options available to get scrappy and fund your company. Here are three unique funding options I have used to scale my business.
A Line Of Credit With A Bank
A line of credit secured through a credit union is the cheapest money you will find. The interest rate is typically around 2.5%. Like any loan, there is specific criteria an individual has to meet to qualify, such as good credit, having an established relationship with the financial institution and collateral to secure your loan, usually a home or the exact amount in cash. This is where this concept can lose people. If you have the funds available, why not put the amount into your business? Once those funds are used, the money is gone. But if you put the funds you had for your business into a line of credit, several things will happen: your personal money gains interest in a CD, a revolving amount of the total paid back is available, and (typically) when the terms are coming near the end, banks will allow you to renegotiate and extend your terms. Initial terms are usually for 12-24 months. As you build trust with a bank or credit union, you open the door for future funding options such as securing a business loan, SBA loans or factoring, if needed. If you don’t have a sizable amount of cash on hand for this option, consider raising a series through friends and family. Once you reach your goal, place that money in a line of credit with a local credit union.
Opportunity Fund
When it comes to funding, Opportunity Fund Community Development (the lending arm of Accion Opportunity Fund) is one of lending’s best kept secrets. The nonprofit provides small business owners, particularly underserved groups, working fixed-rate capital loans up to $100,000 in 45 states. They require borrowers to be established as a business for at least one year.
“Even before the pandemic, women, immigrant and entrepreneurs of color received less funding overall and were charged higher rates when accessing funding for their small businesses. The past year has only deepened inequities in who has ready-access to financial resources, with Black, Latino, Asian and women-owned businesses suffering disproportionately. Accion Opportunity Fund is resolved to accelerate our investments that drive economic mobility by delivering affordable capital and responsible financial solutions to determined entrepreneurs,” says Opportunity Fund’s partnership manager Lindsay Chung.
Point of Sale Websites and Electronic Commerce Loans
Did you know that some of your favorite point of sale commerce platforms like Shopify offer funding options? These companies extend capital to businesses using their platform ranging from $200 to $1,000,000. If your application is approved, funds are deposited in your bank account usually within 2-5 businesses days, and instead of a set monthly payment, a percentage of each sale is deducted until the loan is paid back in full. To be eligible for a Shopify Capital loan, your store must have Shopify Payments or another third-party payment provider enabled, have a low risk profile and be located in the US or Canada. Paypal and Square offer similar loans for business customers.
Regardless of its age or size, the past year has impacted all businesses. Whether you are in need of a micro loan to float your company for the next month or two or are in need of a large infusion of capital to scale quickly, non-equity funding options are available. For more resources, reach out to your local Small Business Development Center, SBA or Score to explore additional options available in your community.
