What is the one thing every business needs and cannot survive without?

The answer is of course, money.

Without money, no business can expect to survive, much less grow.

Unfortunately, unlike larger businesses; solopreneurs, entrepreneurs and small business owners don’t have access to a wide variety of funding options or large pools of funds. But this does not mean that they have no options.

Raising startup funding is rarely easy, but it is not impossible. Here are 5 funding options for small businesses:

1. Angel financing

Angel investors are individuals who invest in startups, usually in exchange for an equity ownership interest. Some angels also invest in early-stage companies.

Where to find angel investors:

• Through other entrepreneurs
• Through senior-level managers working in the private sector
• Ask lawyers or CAs
• Search angel investor networks in your country, state or city
• Check with Venture Capitalists (VC) and investment bankers
• On crowdfunding sites

Successful serial entrepreneurs are often some of the best angel investors. In addition to cash, they may also offer other important benefits to a startup relationship such as contacts, credibility, knowledge and mentoring.

Before approaching an angel investor, make sure you have:

• A clearly thought out business plan
• Research about your industry and market
• An appropriate valuation with reasonable terms
• Answers to questions like what is your business’ USP, what challenges will your product/service address, how will you deal with regulatory requirements, etc.

2. Crowdfunding

Over the past decade or so, crowdfunding has become a popular means of raising funds for startups.

Crowdfunding is the practice of raising fund through multiple funders, usually via crowdfunding websites. Kickstarter is one of the most well-known crowdfunding websites in the world (including India), having raised over 220 million USD from 61,000 launched projects. Other popular sites in India include Ketto, Milaap and Fundable. These sites usually charge some kind of fee to list the campaign.

Crowdfunding enables entrepreneurs to raise funding for their business and promote their products or services. Once a campaign is set up on a crowdfunding website (say, Kickstarter), people interested in the idea can donate to the campaign, usually in exchange for some kind of reward. This could be a share of equity or profits, a freebie, a discount, etc.

A successful crowdfunding campaign often starts with a compelling story and offers a meaningful reward for donations.

3. Small business credit cards

Solopreneurs and small business owners may not always get the business financing they need. In such cases, a business credit card can be a good option. The credit limit on these cards can be substantially higher than traditional credit cards. Many also come with special benefits like cashback rewards, airline mileage points, etc.

On some cards, interest on unpaid balances can be quite high. However, some issuers offer a low or no interest introductory charge for a limited period.

4. Venture Capital (VC)

VCs typically invest in startups in specific industries with high growth potential, especially if they have already shown some traction. In addition to capital, VC firms can provide strategic assistance and introductions to potential customers and partners.

The venture process can be very time-consuming and has no guarantees for success. However, a working product prototype or proof of early customer adoption can raise your chances of getting VC funding.

5. Small business loan

You can apply for a small business loan either at a traditional lender like a bank or explore alternative lenders like peer-to-peer lending sites. These loans can help you grow your business, expand into new territories, launch new sales or marketing campaigns, hire more people, etc.

Multiple types of small business loans are available and they vary by country, loan period, repayment terms, interest rates, etc. These include:

• Small business line of credit
• Working capital
• Small business term loan
• Equipment loan

Conclusion

Some people finance their companies with their own capital (bootstrapping) or by borrowing from family or friends. But there are other options available. Which option you pursue would depend on multiple factors. Make sure you do your research before committing yourself for any length of time.

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