"A bank is not the only option for funding your new small business."
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Contributing Author: Amy Fowler
Thanks to the power of the Internet, it's relatively easy to start a new business. The trick is ensuring that your business survives and grows beyond the first year.
Since the economy entered a recession, banks have become far more risk averse, and it's incredibly hard for small companies to get access to even a small credit line.
Fortunately, bank loans aren't the only form of funding available to small businesses. Here are a few finance suggestions that might help you to grow your new business:
Self Funding
If you plan on applying for any form of outside assistance, then you will need to show commitment to your business. Investing some of your own cash is a good way to do this.
Friends and Family
Borrowing from friends and family has a lot of pitfalls, but it has a lot of benefits too. A close friend or family member will know that you're trustworthy and serious about your business idea. If you do borrow from a friend or family member, make sure that you draw up a credit agreement so that there can be no misunderstandings.
Grants
There are lots of grants available from government agencies. Even if you don't think you'll qualify for one, it's worth doing some research.
There are lots of demographics and industries that qualify for government support.
Credit Unions
Credit unions are not-for-profit organizations that are owned by their customers.
They tend to offer low cost loans, and are generally more receptive to small businesses than banks are.
You will still need a good credit rating before you can borrow from them.
Charities
Many charitable agencies offer loans to help small businesses get started. You may need to complete a course, or work with a mentor, in order to obtain the loan, but the skills you will gain as a result of this will make it worthwhile.
Invoice Factoring and Accounting
This practice involves a business selling its sales invoices to an agency that will advance a percentage of the invoice. When the customer pays the invoice, the agency will take a percentage of that payment, and then pay the remainder to the business. In the long term, this means that the business is making less money, but it can be a useful short-term service for a small company with cash flow issues.
Other Ways to Grow Your Business
If you can't borrow the amount of money that you feel you need, then don't give up! Perhaps you should consider scaling down your business idea and growing more slowly. Instead of renting a small warehouse, outsource your efulfilment to a company that already owns a warehouse.
If you can't afford to pay a delivery driver, again, pay another company to handle internet fulfilment services for you on an as-needed basis. Outsourcing and drop-shipping are all good ways to keep your initial investment low.
Many small business owners over-commit in the early stages.
There's no point paying for a top-of-the line web server co-located in the fastest most high-tech data center in the country if your website gets only a few hundred visitors per day, and there's no point taking on a full time customer service agent if you rarely have anyone call your support hotline.
Start small, and grow as you need to.
About the Contributing Author:
This post was written by guest author Amy Fowler on behalf of Hallmark Consumer Services. Amy works in marketing and is passionate about helping new businesses to grow and develop. Follow Amy on Twitter here.
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