4 great ways to finance your new business

Bootstrapping is not the only way to finance a business.

August 11, 2021

5 minutes to read

Opinions expressed by Contractor the contributors are theirs.

During my university studies, I wanted to start a book publishing company representing populations historically under-represented in the publishing industry. At the time, I thought that bank loans or coming from a wealthy family were the only two ways to finance a business. As a student struggling with debt and no credit history, I walked into the bank to apply for a loan. I was laughed at at the bank.

I researched other financing options and decided that my best option was to start the publishing company of my dreams. I found free resources on the internet: blogs and articles that estimated the cost of starting a new business, financial planning resources to help me create a budget for that money, and related to-do lists. for students. Since high school, I was a freelance copywriter, so I continued to freelance to save money for my dream business.

I pushed myself into a state of near burnout: working over 60 hours a week while maintaining high grades in college and planning my future business. I was doing the work of five people and working for more clients than I could independently manage and maintain the high quality writing and editing services that I am proud of.

Relevant: How I went from solo entrepreneur to team leader

I recognized that my freelance work could become its own business, but I lacked the capital to do so. Digital marketing services like copywriting and editing are still needed in the digital age, so I started to focus on turning my freelance services into a business. I worked diligently on a business plan that included a detailed budget and consulted with experts instead of relying solely on free online resources. I learned what a Standard Operating Procedure (SOP) is and created one.

My learning experience to fund my digital marketing company prepared me to start my independent publishing company. I knew where to find free online resources and already had a multitude of resources saved on my computer. I knew the running expenses of the business and their costs. I learned to prepare for unforeseen business costs. I knew where to find free resources and focused more on organic social media to generate business than paid ads. All the mistakes made in building, planning and funding my digital marketing company served as lessons for the publishing company.

Bootstrapping isn’t the only way to finance your business. Below are some alternative options that I learned during the initial fundraising search for my businesses and some recent findings.

Related: How to start a business without money … and in five steps

1. Business credit cards

It was only recently that I discovered the true power of business credit cards after reading a number of articles on the subject, including one Yahoo finance story of how Jack McColl, a 27-year-old serial entrepreneur, leveraged trade credit to create four six-figure businesses. The article discussed how relying on your personal savings can be detrimental to your business, as business credit cards allow you to borrow money from the bank to grow your business faster. If he could do it, so could I!

Business credit cards offer a higher borrowing limit than personal credit cards, which means you have a better opportunity to build your business credit score. Many business credit cards also offer 0% interest, which is often rare with personal credit cards. In addition, a business credit card affects both your business and your personal credit score.

Related: 4 Steps to Building a Good Business Credit Score

2. Venture capital

Venture capital typically comes from financially stable investors, investment banks, or other financial institutions looking to invest in startups and small businesses with the potential for long-term growth. To attract investors, you’ll need a nearly flawless business plan and quantitative evidence to support your growth potential. A main caveat is that investors usually have a say in the decisions of the business if they choose to invest in your business.

3. Crowdfunding

Crowdfunding is a type of investment where other people donate to help raise funds for your specific needs. Two of the most well-known examples of crowdfunding are GoFundMe and Kickstarter. Budding entrepreneurs can share their financial needs on platforms like GoFundMe and share their donation links on social media. Donors tend to give smaller amounts than venture capitalists. Entrepreneurs who rely on crowdfunding need to plan for the failure of their campaign or business. While entrepreneurs never expect their business to fail, they can face legal consequences if they don’t or never keep their business promises. Having a contingency plan in place in this situation can help avoid donor wrath and lawsuits.

4. Small business loans or grants

The US Small Business Administration (SBA) provides small business owners with contracting advice and expertise and capital. Also, they partner with various lenders to make it easier for small businesses to get loans as the SBA takes on some business risks. Some of these loan programs offer financial counseling and continuing education to help entrepreneurs start and maintain their businesses. The SBA also provides resources for investment capital, disaster assistance, bonds and grants. Entrepreneurs considering enrolling in SBA programs will need a comprehensive business plan, expense sheet, and financial projections for the next five years.

Related: Does a short term loan already make sense for your business?

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