Many small businesses have had issues finding financing in order to grow their businesses or stay afloat during tough times. Bank loans have certainly been harder to come by in many cases. If you’re one of these businesses, there is an outside the box way to try to get some funding if your ideas or business structure are solid.
First, let’s take a look at where funding for small business finance has come from in recent years thanks to some statistics from Intuit. 60 percent of all small businesses have accessed financial capital through large banks, while 47 percent have tapped into small community banks. Credit cards account for a source of lending for one third of all small businesses, while 11 percent have utilized a credit union for lending. The remaining sources are all utilized by one in 50 businesses, if not less. Those include prepaid debit cards, payday lenders, non-traditional lenders and “other.”
If you need help with your small business finances and none of the above sources seem to be a fit for you, the good news is that there are additional options. Crowdsourcing has become increasingly popular in a number of industries or uses. It is a practice of dividing up a task in a broad crowd, so that each person chips in a little bit.
This practice is now being done with lending and is called crowdfunding. Essentially, you convince a bunch of different people to kick some funds into your company through a crowdfunding plan and then raise the capital that way. Sometimes it is easier to raise a few bucks from thousands of people than thousands of dollars from a few people. One example of such a site is Kickstarter, which launched in 2009 and has grown and become quite successful.
In fact, crowdfunding has drawn so much attention that even Donald Trump is getting in on it. As it turns out, Trump has bought a company that is a rival of Kickstarter and provides a platform to create crowd funding. There are different rules surrounding different sites. Some do not allow funders to invest in the businesses; only to fund them in exchange for a tangible good or reward. Others allow them to buy in as, essentially, a shareholder. Either way, there are alternative sources of funding if you think outside the box.
Remember, running a business successfully does not need to be complicated. Keep it simple!
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Manny Skevofilax is a consultant and speaker that helps his clients successfully navigate the challenges of growing their businesses profitably. Since 2003, Manny helps businesses enhance their results by using his experience in strategic planning, financial statement analysis, operations, organizational development, and team-building. His consulting firm, PORTAL CFO Consulting, Inc., has attracted clients from diverse industries in the United States and abroad.
Manny can be reached at 410-808-3441 or via email at manny@portalcfo.com.