Financing Your Small Business

Photo by Becky McCray

Whether you are starting a business or looking to grow your business, there is always a need for capital or financing.

With the advent of Internet, new opportunities for capital have developed. Plus all of the old methods are also still a possibility.

Typically, you, the owner, make the first investment into the business. It may be savings or income from your day job or from another family member. You may also look at borrowing from family and friends. Sometimes it may be sweat equity but it may also be the home you live in put up as collateral.

Another commonly used technique is bootstrapping, finding ways to get the job done cheaper or with bartering or doing without.

And don’t forget the goal of making money which can be another source of funds with which to build your business.

Pam Schallhorn, a colleague from the University of Illinois Extension, recently introduced me to a free ebook, “Startup Wisdom: 27 Strategies for Raising Business Capital.”

This book, done jointly by the Washington State Department of Commerce and Washington State University Extension, covers the methods I just listed plus other funding options such as angel investors, crowdfunding, and “Shark Tank.” It even mentions the use of lottery winnings (not likely to happen). Free money is not discussed (typically a myth) but it does discuss grants which are hard to find and are the closest thing to free. Realize thought that they often come with restrictions, may require matching funds, and take time to both write the application, wait for the review process and then wait even longer for the funds to arrive.

When looking for funding, you need to prepare yourself. A business plan is often needed and some want proof of feasibility. For any type of loan, you will need a clean credit record.

During the course of your business, you probably will use multiple means of financing. Different scenarios may make the various alternatives more or less acceptable.

A useful tip is to build a relationship with your banker. At some point in every business, a loan is often needed. And even if you never go that way, your banker can be a good adviser to your business.

It’s important not only to build the relationship but to work at maintaining it. Keep your banker in the loop with what is going on with your business.

Financing is part of building your business. Take the time to learn your options.

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About Glenn Muske

Glenn Muske is an independent expert on rural small business, working as GM Consulting – Your partner in achieving small business success. He provides consulting, and writes articles for county extension agents and newspapers across North Dakota. Previously, he was the Rural and Agribusiness Enterprise Development Specialist at the North Dakota State University Extension Service – Center for Community Vitality.