Entrepreneurs are full of great ideas and powerful ways to implement them, but like anything in life, starting a new business requires a hefty stack of cold, hard cash. At one time, gathering this cash required hours of traipsing business plans to one investor IVSBY +% after another, hoping one would be interested enough to invest. This approach often took years and yielded disappointing results.
As we approach 2014, however, support for small businesses and startups has never been stronger. Everyone from President Obama to the stars of NBC’s Shark Tank acknowledges that small businesses are the backbone of our nation’s economy. By investing in small businesses, we help strengthen that economy by creating jobs while also supporting other companies through purchasing products and forming partnerships.
But for an entrepreneur starting out, it can be hard to sort through the many funding options available to determine which are most lucrative. While it would be ideal to line a roomful of investors out and let them fight it out for the honor of funding your business, that is often, unfortunately, not the reality. Still, through leveraging the global outreach of the Internet, your startup can receive the funding it needs to get off the ground. Here are a few tips to help you locate the best finance deal for your business idea.
Consider Your Niche
Chances are, there’s something special about your idea. Maybe you’re a single mom or your idea will help those in underserved areas. There are grants tailored to either specific business owners or specific business ideas that can help get your idea off the ground.
Defining your niche will have an additional benefit. As you seek out funding, you’ll be able to summarize in only a few words what sets your business apart from others. Research any investors you approach to discover those financiers that have a particular interest in what your business offers.
Find a Grant
When it comes to locating financing, nothing beats a grant. Money is provided to you, free of charge, that you can put toward your startup. Understandably, locating and landing these grants is extremely difficult, but you’ll definitely never land a grant if you don’t try. This site aggregates federal grants in a variety of categories to see if one might apply to your business idea.
Grants are available based on the theme of your business, as well as your own demographics. There are grants for minority business owners, women, single mothers, and more. In order to apply, you’ll have to dust off your keyboard and start typing. Most grant programs require extensive proposals where you detail every aspect of your organization.
Enter a Contest
Perhaps another sign of the growing support of small business startups is the number of contests that encourage innovation by offering a large financial reward. The Amazon Web Services Start-Up Challenge provides annual rewards of $50,000 plus $50,000 in AWS credits to businesses each year. MIT offers rewards of more than $350,000 each year for its pitch, accelerate, and launch contests.
To improve your odds of success in these contest, find ways to make your project stand out in the crowd. You’ll either have to present your idea in person or pitch it through an essay, so the idea itself has to be as original as possible.
Crowdfund Your Idea
Sites like Kickstarter and Indiegogo provide the perfect platform for businesses to locate funds for a new startup. Crowdfunding has exploded in popularity in the past year, getting attention from both investors and businesses alike. But all of this popularity also means an increase in competition, which means unless your business can catch the attention of the matches, it will likely join the large number of projects that go unfunded on these sites each month.
The most successful campaigns seem to come with a good story. While most entrepreneurs are inclined to highlight the product and hide in the background, on crowdfunding sites, the entrepreneur is the story. It’s important you share what led you to create your concept and the passion you have for seeing that concept to fruition.
Find an Angel Investor
Believe it or not, there are real-life Shark Tank stories. These angel investors are continually seeking a great idea, but before you think they’re simply sinking money into startups out of the goodness of their hearts, these investors have an ulterior motive. In return for your funding, you’ll usually be asked to promise a sizable chunk of your company. If you’re comfortable exchanging equity for financing, an angel investor or two might be just the solution you’re seeking.
Once you’ve decided to seek out this type of investor, the next challenge is in finding an angel investor who is looking for a project like yours. One place to start is the Small Business Administration (SBA). The SBA offers Small Business Development Centers, located around the country, that can help connect entrepreneurs with investors. Gust is another great resource, listing investors and entrepreneurs and boasting more than 1,800 startups funded in the past year.
Take a Loan
If you own a small business, the SBA can help you locate a loan opportunity near you. There are a variety of specialized options available, including loans to help with disaster recovery and microloans. This can be easier than trying to secure a bank loan, especially since restrictions have tightened.
However, if you do decide to contact a bank for a small business loan, make sure you have as many details about your proposed business as possible. This includes full financials that disclose exactly how the loaned money will be used. It might be best to start with smaller, community-based banks, as they will have a more thorough understanding as to how your small business will fit into the existing local landscape.
Putting together the funding to get your business off the ground doesn’t have to be complicated. By creating a good business plan and honing your pitch until it wows anyone who hears it, you’ll increase your odds of getting the financing you need to put your idea in motion.