Unique Ways to Fund Your Small Business

Small business

If you’re a startup, there is nothing surprising in facing teething troubles.  But none of these challenges or troubles is as big or critical as funding your business. That means finding investment to get your business off the ground is, without a doubt a daunting task.  From production space, buying goods to renting office, and hiring staff, turning a simple idea into a business practically requires funds and money.

Unless you are wealthy enough to finance your business or your benevolent relative has left you a lot of money, you probably have to find ways to fund your business.  Luckily, there are some smart ways you can resolve this problem. Here are some of those unique ways to help you fund your business.

How Can You Fund Your Small Business?

1.     Crowdfunding

One of the easiest way to find your business enough funds is crowdfunding- which is a practice of raising funds from different forums or people.  It is an alternative finance and a kind of crowd sourcing.   Luckily, there are plenty of crowdfunding options available for you right on the internet.

When asking for investment funds for your businesses from a variety of investors, it is highly recommended to come up with an impressive pitch. The success of your crowdfunding campaign depends more on how you pitch the idea than it does on the idea itself. Of course, you need a team with you to plan out your crowdfunding campaign.

A common reason why startups choose this method of funding is because of the flexibility of options. Venture capitals are known for being strict with their investments. They will demand more equity in your business than you will ever have to offer through a crowdfunding model. They usually focus more on their returns than the success of the startup. The situation is quite the opposite when you go with the crowdfunding option.

2.     Angel Investors

Angel Investors is no doubt one of the unique funding options among all as they are always looking for innovative ideas to invest in the business. Originally business giants like Yahoo and Google were also used this funding option. It is worth noting that taking funds from Angel Investors requires entrepreneurs to give them some equity share in the company.

3.     Small Business Loans (SBA)

This funding option is a result of the U.S government’s interest in rampant growth of the small business industry.  The s Small Business Administration, in this regard, offers a wide range of loan types and business investments to help business owners get started.  Exploring the SBA loan options is a great way to kick start your business, if intend to run an educational institute or non-profits set-up.   For easy funding, you might want to request for SBA grants.

4.      Venture Capitalists

Much like angel investors, the funding option invest money in up-and-coming- businesses that have high potential to not only grow but also monetary returns.  In addition to that, Venture Capitalist looks for equity share in the business it invests money in. The investors are also interested in getting a right in company’s directorial decisions.  In short, VCs make money through their investments and consider having some control or authority in the business is the best way to do that.  It is always better to investigate this funding option thoroughly before opting it.

5.     Microloans

 Reserved specifically for small non-profit businesses, finance institutions grant microloans to entrepreneurs who don’t qualify for a bank loans. Microloan organizations, instead of giving donations to the non-profit companies allow entrepreneurs to invest in various economic opportunities.  Microloans are also a popular financing option in developing nations.

6.     Personal Financing

There is no denying that investing in a startup entails a lot of risks and these risks are what prevent traditional lenders from giving loans to business owners. This becomes even more skeptical if business owner doesn’t invest his/her own money in the startup.

7.     Purchase Order Financing         

 There is an array of factors that affect the cash flows of any business. These factors may include supply and demand and seasonality.  For examples, sometimes a company is unable to complete the orders due to fewer funds to buys inventory and material to make the products.

In situations like these, purchase order financing can be the panacea to the problems. It helps companies extend advance to purchase material they need to make products. Purchase order financing collect back money when products are sold.  If your business deals in manufactured goods, it stands a chance to makes 20% more on its sales by opting purchase order financing.

8.     Vendor Financing

If your bill payment record is contingent on your product selling record, you may take the benefits by negotiating longer payment terms with the vendors.  Vendors, typically require payments on invoices within thirty days before imposing penalties and late fees.  Negotiating longer payment terms will allow you work with more cash in the interim.

This is even more important if your business has a longer sales cycle than thirty days. That means if sales cycle takes  forty to forty-five days from  purchasing to selling goods, you will not be able to make invoices payment within a  month.  In that case, you need negotiations to avail vendor financing to benefit your sales cycle.

Final Thoughts

In a nutshell, investments and business funding are of paramount importance no matter what industry you want to get into. If you lack sufficient finances, it is important to weigh all options you can choose to give a kick start your business.  Given that, the mentioned funding options are great to consider if they suit your requirements.

Access our network of Investors, get instantly matched with a Lender, or get a business plan by visiting us Funded.com

What Sets a Small Business Apart from a Large Business?

You probably hear terms like ‘small business’ and ‘large business’ quite commonly whether you are looking for software solutions, investment opportunities or something else. Sometimes, it can be difficult for business owners to figure out if what they own is a small business or a large one. The confusion is valid because you don’t often find clear definitions to help you distinguish one from the other. However, it is essential to know the difference so you can pick the right services. This is because most service providers design their service packages differently for small and large companies. There are also other reasons why you would want to know their differences.

Why Know the Difference

You need to know the size of your company because of the laws that apply to these entities. Large businesses have to follow a different set of rules and regulations than small businesses. In addition to that, several federal programs are available that are different for small businesses and large businesses. As an example, you won’t qualify for certain programs unless you are officially a small business and are entitled to the program. You can get into trouble if you think your business is small but the government deems it otherwise.

Also, keep in mind that when you operate as a small business, but spend like a big one, you can put your venture in trouble. So, what sets the two apart from each other?

The Differences between Small and Large Businesses

The Size

How do you determine the size? How do you know that the size of your business is small or large? The federal government has its ways of determining the size of a business. They will look at either the number of employees you have or your yearly receipts. However, the standards are not uniform across industries.

What this means is that a small business in one industry might not be small in some other industry. In most cases, your average yearly receipts have to be over $7 million for the federal government to treat your business as a large one. The number of your employees should be more than 500 for your business to be considered large.

However, this standard of 500 employees is more applicable to the manufacturing and mining industry. However, keep in mind the varying standards across industries. For instance, in some service industries, your yearly receipts could amount to over $21 million, but the federal government will still not consider your entity as a small business. The agriculture industry’s standards can be quite the opposite of that with the government treating businesses with average yearly receipts of more than $500,000 as large businesses.

The same rule applies to the number of employees as well. For example, if you are a part of the wholesale industry, and you have more than 100 employees, your business could be termed as a large business. On the other hand, if you are in the manufacturing industry, the government will write you down in its books as a small business even if you have 1,500 employees.

Internal Structure and Hierarchy

A large business will often have a more clearly defined structure and hierarchy. Almost every case in question will go through various departments before the company comes to a final decision. On the other hand, the structure is not fully defined or is not as detailed. The employees and the owner are not too far from each other. A complaint from a customer can reach from an agent to the owner pretty conveniently. On the other hand, there are several roles beneath the manager that can handle numerous tasks and take decisions.

Due to the hierarchy that normally exists in large businesses, they often delay their decisions. Contrary to that, small businesses take their decisions very quickly. The hierarchical structure also gives rise to a culture of workers performing their respective tasks only. In a small business, the same person could have multiple roles.

Financing Options

There is a stark difference between the financing options that small business and large business owners choose. Large business owners have good PR, a name in the market and some level of dominance in the industry. Such a position allows them to go for options like investment banks. They can naturally attract well-known investors of the country as well when they are in need of finance.

On the other hand, small business owners try to avoid bank loans because of the hardships they face when it comes to paying back debt. In most cases, small business owners rely more on their savings or funding from someone in their family.

Salaries and Perks

Since large businesses are financially more independent, they can offer their employees attractive packages and benefits. Health insurance, dental insurance, yearly bonuses, provident funds, etc. are just some incentives that employees at large companies enjoy.

On the other hand, people working at a small company do not get such benefits in most cases. They can have attractive salaries, but a small business owner cannot afford medical insurance and comprehensive benefits for employees. It is one of the reasons why most of the people working at a small company often look for opportunities at large companies.

Nowhere does it say that small businesses have less potential for growth and expansion than large businesses. For this reason, small business owners should be confident in their efforts to grow. While large businesses have access to big bank loans and broad markets, even a small mistake in their predictions and estimates can result in huge losses.

On the other hand, small business owners face smaller risks when you consider the volume of their loss. Be sure to identify your business size and take advantage of all the benefits that the federal government has made available for small businesses.

Access our network of Angel Investors, Venture Capital or get instantly matched with a Lender, or get a business plan by visiting us Funded.com

Get Matched with a Credit Card!

Does the Business Credit Card Affect Personal Credit Scores?

If you are trying to keep your startup finances separate from personal finances, you might be disappointed.  It is because the effects of your business credit card often show up on your personal credit score. Even if your business faces hardship or goes through any rough patch, it might affect your personal credit score.

That is to say, eliminating your all personal liabilities with your business credit cards is not possible as they need personal guarantees. However, if you‘re a startup, you can use a credit card that does not report your account activity to credit bureau to limit the risk. It may be one of the safest ways as some business credit cards don’t report to consumer credit bureaus but commercial credit bureaus. Also, there are credit cards that do not report a customer’s monthly payments.

But these are limited options. No matter how helpful your business credit card has been in building credit for your business, it does affect personal credit scores or credit history.

Luckily, there are some ways entrepreneurs use to minimize the risk factors related to their business credit cards and help personal credit scores instead of hurting them. Before exploring those ways, let us take a look at how business credit cards can affect your personal credit scores.

Effects of Business Credit Cards on Personal Credit

Typically, the following are the ways that can affect your credit score if you apply for or use a business credit card.

1. Credit Inquiry on Applying for Credit Card

 It is important to know that when a business owner applies for business credit cards, the card issuer considers both his/her personal credit card history and business track record. This may include investigating or checking personal credit, which may affect credit by dropping a few points in the scores.

This is one of the reasons many business credit card bureaus require a personal guarantee on applying.   That means if a business defaults on its payments, a business owner can be held liable to pay all the debts.

Click here to find and compare credit cards to find the best one for you.

2. Utilization of Ongoing Credit

Most of the banks and finance institutes report all account activities to the consumer credit bureau (Experian, Equifax, TransUnion) that includes the ratio of credit utilization of a customer. The credit balances are divided by the total amount of credit limits a user has. That means if you obtain the high balance on a business credit card, it can negatively impact your personal credit card scores.

According to credit experts, it is better to keep your credit card utilization below 30 percent. It makes your business credit cards easy to handle as they come with a high credit limit as compared to a consumer credit card. Plus, if you are planning to make a big investment in the business, it is better to apply for a loan than using your business credit card for it.

3. Reporting Delinquency

As mentioned earlier, some credit card issuers do not report monthly account activities of their customer to the consumer credit bureau. However, they may report your account if you don’t make your payments consistently.  Late payments are reported if they are delayed more than 30 days. If becomes a pattern, the negative marks do not only affect your personal credit card scores but also stay up on report for seven years.

A delinquent account is, without a doubt, an important thing to consider when it comes to improving payment history or personal credit card scores. Poor account scores or default account affects your ability to apply for loan affordable. Plus, late payments can trigger an APR penalty that can go up to 29.99 percent with some business cards.

Business Credit Card Issuer Policies that impact Personal Credit Scores

Although all credit card issuers have different policies pertaining to credit card activities, they might report the business information to credit bureaus on the same issues. It is always worth checking the policies.

  • Barclays:  may report in case of inconsistent payment record
  • American Express:  if your account doesn’t have good standing, it may report
  • Capital One: report all account activities
  • Citi:  doesn’t report account activity
  • Bank of America:  reports delinquent account
  • S.Bank:  doesn’t report account activity
  • Chase: reports when an account is delinquent more than 50 days
  • Well Fargo:  doesn’t report account activity

How to Use Your Business Credit Cards to Build Personal Credit

If you are concerned or apprehensive about the impact of a business credit card on your personal credit   scores, there are ways you can use to minimize the effects.

All you need is to practice poor credit behaviors with both your consumer and business accounts.  

Here are some of them:

Make Payments on Time

Your payment history plays a major role when it comes to building credit score or improving credit history.  It is important to pay at least half of your monthly payment on time, if you want to solidify your credit scores. Paying off the full balance each month is extremely helpful in avoiding interest entirely.

Keep Credit Balance Relatively Low

Keeping a low credit balance is always a good move as your credit utilization has a great impact on your credit scores. You can achieve it by making fewer payments through your credit cards or keeping the credit low.  In case your credit use spikes up in any month, you can manage the score by paying down the balance to help your utilization ratio come back to normal.

Use your Credit Card Wisely

There is no denying that business credit cards are a  good option to make payments for your operating expenses. But if you want to finance equipment or inventory, paying with a business credit card is harder.

 What is more, it may increase interest rate with any business loan you take.  That is why it is important to consider all your options first before you choose to make payments with your business credit cards.

Final Thoughts

In a nutshell, getting a small business credit card is a good idea for making payments, it is essential that you understand how it affects your personal credit score.            

Access our network of Angel Investors, Venture Capital or get instantly matched with a Lender, or get a business plan by visiting us Funded.com

Four ways to secure the nod of angel investors

Securing an investment from an angel investor is considered as one of the most difficult aspects of establishing a business startup. For many, this is even harder than coming up with a good idea for a successful business venture.

Fortunately, there are numerous angel investors out there who can provide financial support to business startups that have potential to make it big in the market. But for entrepreneurs, the common problem is not finding them. Rather, they have a hard time securing the nod of these angel investors. Here are some ways to improve an entrepreneur’s pitch in order to be able to secure investments from angel investors:

Know the audience

A business pitch should vary depending on the character of the potential angel investor. Entrepreneurs should not rely heavily on a “standard pitch” and develop something that could connect more to the possible partners. A pitch should vary depending on various factors such as age, gender, background, and knowledge on the specific market, among others.

Be in charge

Business owners must show to their potential angel investors that they are the ones in charge of the startup. One can get the trust – and later on the deal – by showing that he or she can effectively manage the business to make it successful. In order to do this, business owners must show their expertise on the market as well as exude confidence that the venture will succeed.

Entrepreneurs, however, are cautioned not to show too much confidence on the business. After all, potential angel investors prefer realistic figures over imaginary ones.

Present relevant information

During presentation of business pitches, a number of business owners often start by presenting too much information as regards the market and the business operations itself. Most of the time, this approach is seen as a move that often ends the potential deal. Rather than presenting too much information, entrepreneurs must stick to basic data that will inform angel investors about the market and keep them interested.

Among these data include the current status of the market, as well as the basic figures concerning the business such as the capital and potential revenue in a matter of years.

Be practical

Finally, business owners must keep it practical when presenting before potential angel investors. While it is necessary to inform them of the business operations, going through every single detail of the business is not an appropriate content for a pitch. Instead, entrepreneurs should just highlight the said information and ask the potential partners if they want to know more about this.

More detailed information and useful advice can be found at Funded.com. If you need to access our network of angel investors or a business plan for start-up funding visit  Funded.com

Dealing with investors: What to do before and after close?

Private equity investors are considered as one of the most important people for those who want start or expand their respective businesses. After all, the amount capital that they provide and the way these are handled are among the factors that make or break a startup.

Unfortunately, a number of entrepreneurs think that dealing with private equity investors are limited to the period when the company or business is raising funds. Some believe that once the funding round has closed, the money will fall any time regardless of how they transact with the partners that signed a deal with them.

The reality is far from this misconception. Instead of forgetting about the investors who pledged to provide funds for the business once the money had been transferred, entrepreneurs must keep in mind the significance of giving importance to these people. After all, entrepreneurs would not want the investors pulling out the money in a middle of a crucial project.

Here are some tips on how entrepreneurs should deal with investors before and after the close of the funding round:

Before the close:

Once of the most crucial things that the entrepreneur must do during the funding round is to find the appropriate investor for the company. This would depend on the type of business that he or she is into. There are investors who prefer medical-related companies, while others want information technology startups, among others.

Regardless of the type of business, entrepreneurs must find a private equity investor, or those who understand the risks of investing in the nature of the business. This would mean that the investor is willing to let go of his or her money for seven years, and put it in a rather risky and illiquid asset.

To counter the risks, the entrepreneur must explain to the potential investor the positive side of the investment – for instance the high rate of return for the successful ones.

Perhaps the most important advice for the entrepreneur is to find an investor who shares the vision of the company. This is highly relevant as it would help in the growth of the business.

After the close

Once the agreement between the entrepreneur and the investor has been signed, the former must continue to look after the latter. This is necessary as it increases the possibility of future contributions from the said investor.

“Taking care” of the private equity investor does not take much. The business owner just has to provide regular updates – whether monthly or quarterly – to keep the investor on the loop. Likewise, requests must be kept reasonable and thoroughly explained. This will surely get the business owner on the good books of the investors.

Dealing with partners, especially private equity investors, is not an easy task. However, doing this the right way will ensure the continuous flow of support for the business.

More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.Funded.com

Available Corporate Venture Funds for Business Startups

In recent years, the number of available venture capital funds for business startups that are coming from traditional sources has started to go down. Fortunately, there is a viable alternative – corporate venture funds.

It can be noted that a several multinational corporations have started to allot some of their funds for business startups. Latest data show that roughly around 900 corporate venture funds are currently available for new businesses. Last year, around 16 percent of companies have acquired corporate venture capital, a number that is expected to increase this year.

Corporate venture funds have been available for more than two decades now. But recently, corporations have started to embrace this trend even if it would disrupt the status quo. The reason, they can’t afford not to anything about it.

Several companies have recently declared bankruptcy or have started to vanish because it failed to recognize the changing landscape of the market. For instance, rental company Blockbuster would still be a major player if it recognized startups such as Netflix. This is similar to the case of Kodak. If only it recognized newbies Shutterfly and Instagram, it might have averted declaring bankruptcy.

Fortunately for some companies, they still have time to catch up with the situation. Nielsen, for instance, has already allotted money to fund small investments. Dell is doing the same, maintaining that it will continue investing in startups even with plans for it to be taken private.

Corporate venture capital allows public company to focus on the long term. For instance, American Express Ventures will participate in merger of e-commerce and payments industries. It is also looking for new technologies that could be utilized for the next decade.

If you are an owner of a business startup who is in need of capital, then it is a good idea to look for venture funds from corporations. Securing one would be a good thing, especially since big companies could assure a successful future for your business startup.

More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website. Funded.com

 

 

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