7 Creative Ways to Generate Capital for Your Small Business
Have you hit a wall trying to raise funding for your startup and need some alternatives? If you think startups depend on investors to generate capital, think again! Read on to find out how you can generate capital for your small business without pitching to any investors!
1) Crowdfunding
In the past few years, crowdfunding has become very popular with entrepreneurs and creative developers. With crowdfunding, you create campaigns and ask the public to help generate capital for your business. Kickstarter is perhaps the most popular of the dozens of crowdfunding sites, but there is also Fundly, Fundable, Indiegogo, and several others.
Fundable, in particular, has made headlines for helping non-profits and startups generate capital. However, keep in mind that many business models are incompatible with crowdfunding.
2) Small Business Loans
There are tons of small business loan options to help your business thrive. These include:
- Small Business Line of Credit
- Accounts Receivable Loans
- Term Loans
- Working Capital Loans
And several others. Keep in mind that getting a small business loan from a bank might be challenging, as requirements are very strict. Thankfully, there are third-party financing companies that will issue small business loans even if your startup does not technically qualify for one according to the banks.
If you need to find out more about small business loans, contact Sunwise Capital now and learn how you can grow your business through small business loans with minimum qualifications lower than those of banks!
3) Alternative Lending
Alternative lending simply means getting funding from an organization that is neither a bank nor a government institution. There are literally thousands of alternative lending vendors out there, so you will need to conduct due diligence and be patient as you trawl the market.
There are several different alternative loan types you can choose from, including:
- Merchant Cash Advances
- Microloans
- Accounts Receivable Factoring Loans
- Private Investor Intermediary Loans
And a few more.
4) Presales
When you presale, you are basically selling your products before you launch them. This is a long-established practice in the software and video games industry, but it is becoming more and more popular in other verticals as well.
Today, giants like Apple presale hardware, and even fashion and luxury businesses presale select offers, so why not you?
When launching a presale, you allow your customers to pre-order your products before launch date. Preselling not only helps generate capital in advance but also allows you to gauge customer demand and adjust branding accordingly.
5) Bootstrapping
While technically not a tip to generate capital, bootstrapping indirectly boosts your capital by pushing down costs.
Simply put; by micromanaging your every dollar, you maximize your chance of success. Bootstrapping involves both holding fixed costs down, while managing variable costs very carefully.
Here are a few golden bootstrapping tops according to Inc.com’s Dave Kerpen:
Fixed Cost Tips
- Share office services
- Share equipment
- Co-locate with other companies
- Move to a business incubator
- Use existing infrastructure
- Delay capital purchases
- Leave instead of purchase
- Negotiate all fees and terms with third parties, including suppliers and service providers
Variable Cost Tips
- Treat variable costs like your own personal budget
- Use teleconferencing to minimize travel cost
- Use smart scheduling to increase efficiency
- Hire local interns
6) Vendor Financing
In addition to the bootstrapping options above, it’s also a great idea to negotiate trade credit with key vendors.
If your business model relies on selling third-party products, you should look into negotiating favorable payment terms with your suppliers.
Most suppliers utilize 30-day payment cycles to fulfill their invoices. This means that you have a month to pay for what you’ve purchased before facing penalties and late fees.
However, if you are planning to grow and sell more of their products, you may be able to negotiate a longer payment window for your business. This will essentially leave you with more cash, which you can use to generate capital in-between paying the invoices.
Negotiating longer payment terms is crucial if you have a sales cycle that is longer than the standard 30 days. For example, if it takes your company two months from vendor purchase to retail sale, you will always be behind on payments. Be sure to tell your vendors if that is the case!
7) Angel Investor Financing
Finally, you should also look into angel investors. Basically, angel investors are people with a lot of available capital and an active interest to invest in new businesses.
Many startups have grown spectacularly thanks to angel investors in the past few years. The internet makes it easier than ever to find highly qualified and interested investors for your startup, without ever having to step into a boardroom to pitch your business idea!
Angel investors often work in groups, where they refer promising startups to each other and jointly screen potential investments before financing. Angel investors are often business owners themselves, so they can help guide your company to success if they have a stake in it.
Additionally, an angel investor is a long-term business contact that can prove invaluable as you mature as an entrepreneur.
However, angel investors will require a stake in your business, and take a corresponding cut from your profits. When dealing with an angel investor, you are basically relinquishing part of your business to them.
If you agree on angel investor funding, you will be responsible to act in their best interest when it comes to your company’s assets, because they will be the investors’ assets as well.
Launch a Startup and Generate Capital the Smart Way
Quitting your day job and launching a company isn’t for the faint-hearted. You will need to handle risk, define a budget, create an offering and somehow manage to turn a profit as well!
Thankfully, there are lots of good and dependable online resources that can guide you in the right direction. Check out the “Start Your Own Business” section of the www.whatyourbossthinks.com for a wealth of solid, unbiased information on how to launch, manage and generate capital for your own business!
