5 Unique Financing Options for Your Small Business

Finding financing for your small business can sometimes be a challenge. Whether you need to fund some renovations, keep the business going through some difficulties, or purchase some stock, small business owners often need to find some money.

More than 51 percent of businesses in 2014 required external financing. Here are five financing options you might want to consider for your small business.

1. Crowdfunding

Crowdfunding is an option that is growing more popular. In 2015, the National Crowdfunding Associate of Canada reported that $133 million was raised via crowdfunding. Businesses that can offer debt/equity funding or reward/donation-based models tend to do well. Equity crowdfunding is legal in BC, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, and Nova Scotia.

Crowdfunding allows you to quickly gain followers and supporters, but you have to have some legal protection in place if you have intellectual property or ideas someone could steal before your launch.

2. Self-Finance

Self-financing, or bootstrapping, is a common way to get your small business off the ground. While it is risky to finance your small business yourself, it saves you from relinquishing ownership or taking on more debt than you should. The goal is to get the business producing revenue quickly, so if you bootstrap your company, you will quickly recoup what you put into the business.

3. Personal Loan

If you don’t wish to borrow from a bank, and don’t have the money to bootstrap, you can always borrow from friends or family. This is a common way to high-growth, small businesses to get started. It does come with some baggage, however, since personal loans will often cloud personal relationships. It is important to not let emotions get in the way.

Make sure to lay out clear expectations around the terms of the loan, including the payback date and interest rate. It’s best to get legal advice even if you feel you don’t need it due to the close relationship you have with the lender. This might be the main reason you should seek advice from an impartial party who knows the law.

4. Investors

If you’re willing to give up some equity in your business, you might want to consider getting an angel investor. This is someone who will put their own money into the business with the hopes for future return when your business succeeds. The investor may be full- or part-time, which means you might have to give up part ownership of your company.

However, you will benefit from not having loan payments. These types of investors typically look for people with high-growth businesses. If your business suits the bill, there are several places to look for potential investors: the National Angel Capital Organization and AngelList are two such options.

5. Small Business Loan

The most traditional way to go is to get a small business loan if you are not averse to going into debt to finance your small company. Banks are often the number-one place to go but there are other options. Bank loans can be hard to secure due to their naturally conservative tendencies.

If you go with something other than a bank, make sure you understand the terms and commitments before you agree to borrow.

Your small business’s current financial situation will dictate what kind of money you raise and how you raise it. As long as you have a solid business plan, keep a level head and have a good grasp of finances, you should be able to secure the financing you need to fund your project.

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