The most innovative funding strategies adopted by modern entrepreneurs

Many entrepreneurs feel their dreams risked when they realize how tough and expensive it can be to get small business loans from banks. Then, investors are at their stingiest best when it comes to parting with their money to fund business ventures, with so much choice at their hands. The implications for an entrepreneur – capital fundraising becomes a real pain. Also, the need to innovate in terms of inviting equity and raising funding stems from the fact that most investors realize that equity will not yield them anything substantial, unless the company exits from the market. Because startups tend to take their time becoming profitable, the investors’ annual earnings won’t be more than a meager percentage of their investments. No wonders, investors are picky about where they put their money.

Ten years down the line, when you’ll be a business authority of your domain, all your long forgotten friends will call you to wish you on your daughter’s second birthday, that’s how life works. Why not make your business venture appeal to the investors inside your friends and family members, by giving them a loan structure that promises them good ROI, repeated payouts and peace of mind? To make investors comfortable about investing in your business, offer them a revenue share as payback, up to a certain percent. For instance, for anybody who pitches in with $50,000, promise a 10% payback with 2 percent revenue share. In numbers, this means that you’ll use 2% of your business’ revenue to pay back the loan, along with an interest of $5,000. Here are the awesome benefits built into such an innovative arrangement:

• You do not have to give up equity in the company
• Investors will be happy with the regular checks they receive every month
• It’s awesome ROI for the investors
• With angel investors, VCs, and private equity firms becoming stingier with their money, arguably because they have so many worthwhile ventures to invest in, it’s the need of the hour for entrepreneurs to think beyond the known and established methods of funding. The revenue share debt-funding model described here is a good first step.

Many a time, banks refuse loans to small business owners and startup entrepreneurs if they do not have any life insurance policy. This often means that entrepreneurs have to pay hefty premiums on critical business loans. Having term insurance already in place before you go to the bank asking for a loan is a much better option, because you can leverage it to secure all kinds of small business loans if and when the need arises. Most banks are ready to provide decent loans in return of the benefits of the term policy of the loan seeker. So, if you are in the middle of blueprinting for your startup and looking to raise capital from wherever possible, get yourself term insurance to be in a better position to negotiate a small business loan from the bank.

Crowd-funding is a lot more than a fancy new buzz word for people who like to discuss 'entrepreneurship' without really breaking a sweat trying to actually do it. Kickstarter and Indiegogo are the hottest names from the crowd-funding market space, with both platforms already having empowered dozens of startups to raise appreciable amounts through crowd-funding. The hundreds of investors that excitedly follow the buzz at these platforms are not even always looking for equity, but just happy to pitch in for helping awesome ideas see the light of the markets.

Several startups have successfully raised thousands of dollars from crowd-sourcing and have hence been able to quickly undertake their first production runs, serve their first orders and record their first dollars of profit. Apart from the funding, crowd-sourcing platforms also work as great channels of gathering attention around your ideas, learning from the hottest trends from the entrepreneurship space and even pitching your product to people who could well be your first buyers.

If you have your wallet inflated with a fair amount of credit cards, now is the time to check out on the special interest offerings on each. Most banks offer incentives like 0% interest rates up to a certain amount of credit card usage and minimal interest rates on a subsequent bracket. You can smartly budget for a decent portion of your startup’s initial working capital requirements just by smartly managing your credit cards’ provisions for zero or low interest credit. Throw in your saving bonds and all your loose cash and you will have prepared a pretty decent pot of working capital for your business.

Nothing beats the ecstasy of winning some funding from investors. With the horde of Shark Tank like competitions happening across major nations of the world, most entrepreneurs have a tangible and substantial opportunity to showcase their ideas and talents to investors and win decent amounts in competitions relevant to their niches. Coveted competitions not only offer hefty price money rewards, but also connect the winners with investors who are not only willing to put in decent investment contributions in exchange of meager equity stakes, but also ready to offer capital-fundraising consultancy to the entrepreneur.

Doing business was never easy; if anything, it’s become tougher in the 21st century, where competitors are unforgiving and change is driving the market every single day. As an entrepreneur, it’s important to realize that funding is the foundation upon which a massive empire of innovation, hard work and strategizing needs to be built. So look to be innovative in how you manage funding for your business, but focus all the while on making the capital work for you, rather than you working for more capital all the time.