ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How to Fund Your New Business

Updated on December 22, 2014

If you’re thinking of owning a business, the first concern that crosses your mind is funding. Having a dream and turning it into a reality are naturally two separate things. With the economic collapse of 2007, aspiring business owners were caught in a rut between finding the money to launch their ideas and having to conform to stricter lending policies. This put those without any credit history or perhaps a troubled one in a challenging position.

The fall of many corporate clients started an earnest call by policymakers and leaders encouraging entrepreneurs to take a plunge. With big companies trying to clean up their own reputations and straighten out their credit messes, economic watchdogs relied on small businesses to keep the economy afloat. But with big banks at a freeze until the financial mess was sorted through, several funding options appeared to help small businesses. Now entrepreneurs had access to several methods of starting their own businesses, thanks in most part to increased federal funding, and private citizens who used their own startup passions to create online environments linking borrowers to lenders.

But before considering any of those options, business owners must first understand their financing needs and limits. The first step is to evaluate how much your startup will cost you in the short-term. Most new companies don’t see a real profit until a few years down the line, unless they are a tech company, when they have managed to grow their customer base, increase their revenues, and eventually cover their costs - including their loans.

The first reliable source for any entrepreneur is the Small Business Administration, which offers new business owners with sources to strategic and financial support. The SBA website holds a treasure trove of materials on starting a business. Some of those include:

  • Mentorship – the SBA launched the SCORE site a few years ago to connect new business owners with experienced ones who serve as mentors. These volunteers help clients build business plans, discuss strategies, offer advice on funding, and help evaluate the business plan’s feasibility. There are also online workshops and webinars available at no cost. You can find access to the various links at https://www.sba.gov/tools/local-assistance/score.

  • Financing – the SBA has links to the different types of funding available, including grants at the federal, state, and local levels, and a national registry to banking institutions that provide SBA approved loans. Federal grants are only offered under strict guidelines since they must be approved by the government and authorized by the president. State and local grants have their own restrictions as well. If your company is research-based, there are specific grants available as well. Contrary to what many believe, grants are not usually free money, but the SBA’s site does a good job of explaining the requirements and expectations for grant funds. Loans are also available to borrowers who qualify, namely to those with poor credit histories, specifically targeted at women, and those that fall within a particular demographic group. Loans must be paid back with interest, although they won’t be as expensive as non-SBA loans. That information can be found at https://www.sba.gov/

  • Women Entrepreneurship – The SBA has a site focusing particularly on women. It works with the Office of Women’s Business Ownership to provide guidance and strategic support for any woman interested in launching her own company. As a federal entity, the SBA is also linked with the National Women’s Business Council, which conducts research for female-based companies. There is also an archive of podcasts and PowerPoints to help visitors understand the steps to take to launch a successful business. You can schedule an appointment with the numerous volunteers and groups in the immediate region for free consultations. As mentioned before, there are several funding opportunities catered to women. Visit https://www.sba.gov/content/women-owned-businesses to learn more.

If you’re not looking for help or are not qualified for that help from a government-based group, there are other funding options available:

  • Crowdfunding – Propelled by the rise of the internet and the frustration associated with the burden of borrowing from big banks, crowdfunding was introduced as an online marketplace for borrowers and lenders. New business owners can open an account with any of the numerous sites now available to the public and raise money to fund their endeavors. Most of the investors are average citizens looking to fund the next great idea or nonprofit work. Some of the money is offered as donations and is not expected to be paid back, other investments work as small loans, and still others are offered with a shareholder or profit interest in the company or project. Once controlled by a few sites, the market is now saturated by numerous crowdfunding companies that focus on specific goals. For small business owners, Kickstarter and IndieGogo are good places to start. Both have built solid, reliable brand names with the media and business magazines alike. If you want to search for your own crowdfunding venture, visit the industry group’s site at http://www.crowdsourcing.org/. Click on “Sites” located on the dashboard and search through the hundreds of links available.

  • Microlending – First geared at poor nations abroad, microlending has made its way to the U.S. as an alternative to crowdfunding and big bank borrowing. What sets it apart from crowdfunding is that the funds are held by a group that offers small loans to willing borrowers. The investment must be paid back with low interest, but since the loans come in small increments, they don’t place a huge credit burden on borrowers.

  • Family and friends – The biggest benefit to borrowing from loved ones is not having to pay back the loan with interest or any vested ownership in the startup. The greatest disadvantage is that relationships can be potentially severed if your company nosedives or you don’t earn any profits within the first few years. Sound bit of advice: any money borrowed from trusted ones should be backed by a binding contract reviewed and prepared by qualified attorneys. This ensures that there are no future misunderstandings and protects the lenders from any unexpected consequences such as bankruptcy or even death.


Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)