Financing Options for Small Businesses & Startups

If you’re considering expanding or launching a business, but lack the funds to do so, you’ve got several options when it comes to financing it. Let’s take a look.

1. Bank Loan

If you’ve got good credit, and if your business can show profitability, you might opt for a small business loan. The Canada Small Business Financing Loan, which is offered through various banks throughout the country, can provide up to $500,000 in funding to qualified companies. Your company qualifies if it has gross revenues less than $5 million. The loan can be used for:

  • Real estate
  • Equipment
  • Leasehold improvements

2. Venture Capital

If you’re a startup–meaning you are on a short trajectory to profitability or exit–consider pitching a venture capitalist for funds to expand your business. Many VCs work in specific industries, such as technology or healthcare, because they have the expertise to help these companies succeed. And while getting a VC to sign on to funding your company is immensely difficult, the benefits you reap are twofold: first, you have the money, but you also have the key to their contacts and expertise, and that is invaluable.

Venture capital is best if you’re looking for larger quantities of money, over $500,000. Keep in mind you will  have to give some equity to your venture capitalist, and that he usually wants to see your company’s exit strategy executed in about 7 years.

3. Angel Investors

Angels are also hard to convince of your brand’s value, simply because there is a flood of startup companies clamoring for the cash. The money is less than that with VCs, and they’ll take 5-25% equity in your company. Angel investors may be more vested in your company’s success, as they are typically self-made millionaires looking to mentor startups and make more money.

4. Bootstrap

If possible, bootstrapping your business is always best. By taking money you have saved, you don’t have to give up equity to investors, and you don’t have to pay back a loan. It’s not an option for everyone, but if it is, take advantage of it.

5. Credit Cards

Credit cards are rarely the best option for small business financing, but sometimes they can’t be avoided. If you have a zero percent rate on your card, or a promotion, take advantage of the extra cash you can secure with no loan application or pitch deck. But keep in mind that the promotional rate may not be forever, so make it a goal to pay off the credit card as soon as possible.

Susan Payton is the President of Egg Marketing & Communications, an internet marketing firm specializing in marketing communications, copywriting and blog posts. She’s written two books: 101 Entrepreneur Tips and Internet Marketing Strategies for Entrepreneurs, and has blogged for several sites, including The Marketing Eggspert Blog, as well as MashableSmall Business TrendsFutureSimple, and Lead411. Follow her on Twitter @eggmarketing.

Photo: 401k on Flickr.


One response to “Financing Options for Small Businesses & Startups

  1. If you have equity in your home, you can always get a HELOC (home equity line of credit). It might be cheaper than a normal bank load and easier to get. If your business is real estate investing on the other hand, you can probably get a mortgage for investment property a lot easier than a bank loan for another type of business.

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