A common issue I hear when speaking with entrepreneurs, aspiring entrepreneurs, or small business owners is that -- on top of all of the operational issues that come with running a business -- finance seems to be wrapped in a cloak of mystery.
Sure, there are business incubators that are sponsored by private corporations, colleges and universities, and other organizations, but simply knowing about these options isn't enough. Even articles outlining different types of capital, like crowdfunding or other non-traditional types of financing, might not cover an option that works for you.
Going out to the marketplace to ask for money for your business isn't easy, especially for your first launch. It's okay to feel a little anxious. What's not alright, however, is to go into those conversations without knowing all of the different financing options available to you.
Yet another common concern, stated in almost every situation, is that the information associated with raising capital can be complicated and intimidating -- no one wants to make a mistake. Finding potential investors, deciding what terms to offer, how much money to raise or borrow, and how to manage investor expectations can make any business owner feel some trepidation.
Sure, finance and accounting can be complicated, but so is running a business or starting one from scratch. As entrepreneurs and small business owners you are already juggling competing interests and forces -- raising capital is simply another opportunity to grow your business.
Let's take a look some of the sources and ideas you should always keep in mind when bootstrapping your business:
1. Don't assume you have to borrow money.
Many entrepreneurs automatically assume that in order to raise money for their business they have to take on debt. That is absolutely not true.
Regional development corporations, small business grants, innovation grants, local business stimulus initiatives, or investors from business incubators can be great sources of non-debt financing. Some non-debt financing may result in you giving up ownership, so be sure to work with your with CPA or other certified financial professional before making any decisions.
2. Make sure to read that fine print.
When you are borrowing money from individuals or institutions, or raising capital from external investors, it's absolutely critical to read and understand the associated terms and conditions. It may be tempting, especially given how grueling the fundraising process can be, to assume all terms agree with what has been previously discussed.
Don't fall into this trap. Brew some fresh coffee, and be sure to review these details.
3. Realize the SBA is your friend.
The Small Business Administration is not only a great source of verified information about small business financing and regulatory issues, but can also provide much needed financing. For entrepreneurs dipping a toe into capital raising, the Microloan program offered by SBA might provide an excellent first step in the capital raising process.
4. Use technology, but come prepared.
There has been, and still is, a lot being analyzed and written about the proliferation of peer-to-peer lending platforms and other online sources of capital. Such platforms can provide important bridge financing that you can access without having to leave your office, but you must still come prepared. Technology is no substitute for preparation, and that's especially true when it comes to raising capital.
As you go about the process of raising capital to help grow and expand your business, you'll inevitably feel some stress and anxiety during the process. With all of the sources of information available, some of which may very well be conflicting in the advice they give, it's easy to get overwhelmed and frustrated.
Keeping yourself aware of the all of the different options out there can help you raise the capital you need, grow your business, and keep your business moving forward.