Starting a small business is hard enough, but seeking capital can open a whole new set of challenges even for the most seasoned entrepreneur. If you’ve already utilized your own funds and maxed out personal credit cards, you’re not alone. We hear that from a lot of the small business owners we work with. However, there are a multitude of creative fundraising sources which we’ll explore in this blog.
[custom_headline type=”left” level=”h1″ looks_like=”h2″]Crowdfunding For A Small Business[/custom_headline]
First, Family and friends are the most tried and true sources of capital – but not in the way you might expect. Think creatively about utilizing crowdfunding as a way to leverage your existing networks while expanding them to the broader internet community. This advice is particularly relevant for new and smaller companies that are not yet profitable.
- Kiva Zip is a unique crowdlending platform that allows you to borrow money amongst your family and friends first, before being featured on the website. They offer loans up to $10,000, and loans are 0% interest with a repayment of up to 36 months.
- Other crowdfunding sites such as Indiegogo or Kickstarter allow you to host a fundraising campaign either as a donation or for pre-purchased products. Remember that once your project is funded, follow up is important, whether it involves fulfilling pre-orders for your product or simply informing your funders of progress toward your goal.
[custom_headline type=”left” level=”h1″ looks_like=”h2″]Small Business Loans From CDFIs[/custom_headline]
It’s a shame that Community Development Financial Institutions (CDFIs) are such a little known resource to small businesses! CDFIs were designed to work with clients who are not traditionally served by banks and offer loans to small businesses. Although this category includes banks and credit unions, many community development institutions are nonprofits that have requirements and terms that are much more flexible. Below are a few local examples from the San Francisco Bay Area, but if you are located in another region, check out Opportunity Finance Network’s list of CDFIs by region:
- Working Solutions is one of the only CDFIs that offers loans to startup businesses, which make their loan product highly sought after. Additionally, they offer loans to existing businesses up to $50,000.
- Opportunity Fund lends in the San Francisco Bay Area and Los Angeles with loans of up to $100,000. Additionally, they offer a unique EasyPay loan for businesses in need of working capital.
- Lastly, a shameless plug for Pacific Community Ventures as we lend throughout California for companies seeking up to $200,000. We also match you with an industry advisor to support the company throughout the term of the loan.
[custom_headline type=”left” level=”h1″ looks_like=”h2″]A Note About Online Lenders[/custom_headline]
Online Lenders are a whole new territory for small business owners, and if you are nervous about utilizing online lenders for a loan with a quick turnaround, you’re not alone. Conduct due diligence on your potential lender, and make sure you understand the terms of the agreement. Find out the details — is the interest rate is compounded daily or monthly, are there are any balloon payments or prepayment penalties, etc.
At some point, your company must stand on its own two feet and begin to build business credit. If your bank is happy to manage your cash but less than enthusiastic about extending additional capital in the form of a term loan or line of credit, know that there are many creative options available.