The 5 Roads to Funding Your Startup

You’ve had that brilliant idea for a business for years now. Whether it’s the clever app that’s going to revolutionize how we get a date, the vegan taco/pizza/pancake truck, or the self-walking dog leash that scoops the poop for you, you know your idea can not only change the world…but change your life (and your bank account) forever.

Screen Shot 2016-03-15 at 9.27.17 PMBut, then enters the age-old question…”how am I going to pay for it?” Real businesses take real money to get them up and running. Whether it’s hiring an attorney to do patent research, a marketing team to get the word out, or even a design team to help you prototype, an idea will remain an idea until you have the proper funding to turn it into something real.

So, how do you do that? Well, only a few years ago, you basically had two options.

  1. Slog down enough egg nog at the Christmas party to get the guts up to corner your rich, lawyer uncle and “hail mary” your business plan under his nose.
  2. Slap on a suit and march down to the bank in hopes of proving your idea is loan-worthy, even if your car, house, and cats have to serve as collateral.

Fortunately for us, those days are long gone. Welcome to the future of small business funding.

Over the last few years, several options have evolved into legitimate models for acquiring the money you need to get your business off the ground. What follows is a primer on 5 distinct categories of business funding that you can explore, and in some cases, take advantage of no matter your business, your timing constraints, or your personal credit.

Each type of funding has its own advantages and disadvantages, so explore each careful to determine which makes the most sense for your individual situation.

Angel Investors & Venture Capital

Although these two models have their differences, each revolves around the fact that you are offering an investor an amount of equity (a.k.a. a percentage of profits for a certain length of time, even forever) in your business in exchange for an infusion of capital. This describes the kinds of deals you see on Shark Tank. For example, a private investor might offer you $50,000 in exchange for 20% ownership in your company and/or its profits.

The difference between angel investors and venture capitalists is fairly simple. Angel investors tend to be individuals who have a high net worth and invest in companies for fun, profit, and personal interest. This could be the rich dentist who’s bored with golf and sports cars, but wants to help two young inventors from his home state with their new robotic toothbrush. They would create an arrangement where he fronts them a certain amount of money, and in exchange, he receives a return on his investment via the profits they make after expenses.  If they don’t succeed, he loses his money, but the inventors don’t owe him anything (unless otherwise specified in their agreement).

Free Guide: 154 Sources of Funding for Small Businesses

A venture capitalist, however, is less of a hobbyist. She is a shrewd and seasoned investor who chooses investments more on the likelihood of turning a very specific return on her investment. The VC is more focused on making a return over helping out someone for whom she has a soft spot. However, she typically has developed strong business acumen and can serve as a mentor for the young entrepreneur. However, it’s still a situation where, typically, investment is traded for equity and the entrepreneur doesn’t have to pay anything back.

Crowdfunding

This type of funding has come into greater popularity over the last few years with the advent of platforms like IndieGoGo and Kickstarter. Crowdfunding focuses around generating cash via a social campaign. In return, the entrepreneur offers boosters both advance access to the product or service, as well as specific rewards.

Business owners have used crowdfunding to help cover everything from design and building costs to even travel expenses to get their product or service created. At the time of publication of this post, the highest-grossing crowdfunding campaign was the video game Star Citizen, which raised $109,010,029. Yes — that’s nearly $110 MILLION.*

However, it’s not as simple as slapping up a Kickstarter page and expecting generous, anonymous donors to fall into your lap. Successful campaigns often become full-time jobs, with the entrepreneur often employing major marketing agencies to help them plan, create and execute their campaigns. That said, crowdfunding can result in some very serious wins…even into the millions.

Government Loans

Let’s begin by clarifying that although we’re including all Government-related loans under one heading, they’re not all the same.

The major player in government loans is the Small Business Administration or SBA. The irony? The SBA doesn’t even issue loans. Instead, it provides loan guarantees to entrepreneurs and small businesses, issuing a guarantee to the borrower’s bank to pay back a certain percentage of the loan if she/he is unable to do so.

The federal government isn’t just being nice…it has a vested interest in helping small businesses grow and flourish. As a result, the requirements of certain SBA loans are less stringent in terms of the owner’s equity and collateral than commercial loanss. Therefore, this makes the SBA an excellent source of financing source for startup businesses. And in many cases, the SBA will guarantee loans for smaller sums than most banks are willing to lend on their own.

Peer-to-Peer (P2P) Lending

Peer-to-peer lending, often abbreviated (P2P), is a relatively new phenomenon. Instead of going through an institution, a borrower is matched with an individual lender through an online service. These are typically unsecured loans (no collateral required).

This model of lending provides benefits to all parties involved; lenders often earn higher returns than other investment vehicles, borrowers have access to lower interest rates than banks, and the P2P lending company profits through marginal fees on each match they provide.

Frequently, the P2P platform is responsible for checking the credit of the borrower and matching them with the appropriate lending source. Fear not, however, if your credit isn’t in the best shape. There’s a match for everyone; the terms will just vary.

So, Where Do I Start?

Take a good look at your individual circumstances and your ideal situation. Are you willing to give up a small piece of your company in order to avoid the stress of being strapped with business debt for a few years while until you become solvent? Do you have the time and resources to craft a successful crowdfunding campaign?

You have more resources than any other time in history to get the money you need to get your startup up and running. I suggest you take some time to explore different platforms and funding sources to determine which is the best fit for you.

My team has compiled a comprehensive guide called 154 Sources of Business Funding. We’ve compiled as many funding sources as we could find across all styles discussed above, and it’s available to you at no cost. Click here to learn more.

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*https://en.wikipedia.org/wiki/List_of_highest_funded_crowdfunding_projects

 

5 Routes to Funding Your Small Business

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Perfecting Pinterest: Interview with Beth Hayden

Perfecting Pinterest: Interview with Beth Hayden

Beth Hayden is a nationally-known speaker and social media expert.  She provides master training for NY Times Bestselling Authors, Political commentators, personal development coaches, and more.

Aside from also being a senior staff writer to Copyblogger.com, as well as her site, BethHayden.com she was approached by Wiley Publishing to literally write the book on Pinterest, a new and wildly-popular social bookmarking site.

The book, Pinfluence, is a complete guide to Pinterest marketing that teaches readers how to effectively raise awareness for a brand, product, or service, drive traffic from Pinterest to your website, and connect with current and potential customers.

Interview

Podcast: Play in new window | Download (Duration: 44:31 min — 64.2 MB)


Resources and Follow-Up

56 Ways to Market Your Business on Pinterest
http://www.copyblogger.com/pinterest-marketing/

Beth’s Book on Amazon:
Pinfluence: The Complete Guide to Marketing Your Business with Pinterest

Beth’s Website:
http://bethhayden.com

Beth’s Pinterest Profile:
http://pinterest.com/bethhayden

“Pin It” Button for WordPress:
Pin It button for WordPress

 

Bootstraptitude: Interview with Bijoy Goswami, The Bootstrapping Guy

Bootstraptitude: Interview with Bijoy Goswami, The Bootstrapping Guy

How do you start a multi-million dollar business with only lint in your pocket?

Bijoy Goswami can tell you.  Goswami has been working and researching for years in the areas of bootstrapping businesses and working with other collaborators for the greatest good.  He has since been profiled in BusinessWeek, US News, Entrepreneur Magazine, and Information Week, and has some pretty “big deal” clients and speaking engagements that keep him plenty busy.  He recently sat down with me (Benjy, The SmallBizElevator “Operator”) to chat about the secret to getting a business off the ground, and the serendipitous process of actually creating that business along the journey.

In our conversation, Bijoy and I cover:

  • The differences among “craft” businesses, angel-funded startups, and bootstrapping…and which one is right for each personality.
  • How Southwest Airlines probably wouldn’t be one of the #1 airlines in the world today if they hadn’t bootstrapped through lawsuits, plane acquisition, and passenger handling.
  • How your business can see short and long-term benefits by being open to what you didn’t originally anticipate.
  • What the heck “bootstrapping” actually means, and where the term originated.

 


Interview

Podcast: Play in new window | Download (Duration: 1:09:50 min — 67.1 MB)


Resources and Follow-Up

Bijoy Goswami’s Website:
www.BijoyGoswami.com

Twitter:
@bijoy

or try Googling Bijoy Goswami


 

HELLO, My Name Is: Interview with Scott Ginsberg, The Nametag Guy

HELLO, My Name Is: Interview with Scott Ginsberg, The Nametag Guy

What happens when you wear a nametag twenty-four hours a day, seven days a week?

Scott Ginsberg has done just that for the last 4,305 days – over twelve years.  What started as a social experiment has evolved into an urban legend, world record, cultural phenomenon – even a profitable enterprise. If you Google the word nametag, and you’ll see his work benchmarked as a case study on human interaction, revolutionizing the way people look at approachability, identity and commitment.

As a writer, Scott’s authored twenty-five books, produced his own online show on NametagTV.com and reached millions of readers on his an award- winning blog.

As a performer, his one-man show has made over six hundred corporate appearances in five countries.

He has been featured in hundreds of outlets such as 20/20, CNN, USA Today, The Wall Street Journal, Inc. Magazine, The Associated Press, REDBOOK, FastCompany, The Washington Post, Paul Harvey, The CBS Early Show and Headline News, and Scott was even inducted into the hall of fame of Ripley’s Believe It Or Not.

And best of all, we went to high school together.

Find out more when we talk about:

  • How a simple experiment turned into a life-changing career, and how you can apply his lessons to your own personal brand
  • How to use “strategic serendipity” to your advantage by being ready for good fortune when it shows up
  • The elements that made Scott a highly in-demand speaker and consultant
  • Why having an attitude of being open to what the world brings you can lead to some unexpected booms in your career

 


Interview

Podcast: Play in new window | Download (Duration: 38:04 min — 36.5MB)


Resources and Follow-Up

(According to Scott’s instructions):

“Go to Google, and type in the word: ‘nametag.'”