Businesses are struggling to find funding due to the dismal financial recession. Everyone is tightening their belts, even the banks and as a result, the number of loans being granted to people by commercial lenders has significantly dropped. Small businesses have even become reluctant to ask for funding because of the difficulties in receiving it.
If a bank turns your business proposal down, do not give up. Banks are not investing in businesses as much as they used to because of the current financial climate, so try not to take it personally.
Small business owners now have to think outside the box
Finding alternative routes to fund their business in order to survive is crucial. Personal finance is more important at this time than ever. There are a few successful routes small businesses are turning to including angel investors, venture capitalists, friends, family and business associates.
will own a share of your company, so you will trade as much ownership as you wish in exchange for a start-up investment. Only give away control of your company if you wish to, if you give a single investor 50% or more you will lose significant control of the company decisions. Although, this can be a useful way to support a business, angel investors are not for everyone. Some owners feel they lose control over their business, if this is something you feel you will struggle with; it is not the option for you.
You can generate ‘venture capital’ from individuals. However, venture capitalists will expect a very high return so be careful about the business plans they choose to provide funding for.
Friends and family
are willing to help your business out financially. Just remember to treat them like an ordinary investor. Just because they are not working at your local bank, doesn’t mean they don’t want their money back. If a family member or a friend wishes to lend you money, sit down with them and devise a plan on how you will pay them back, and stick to it. Use your business contacts too. A person that is well acquainted with your business may be interested in your vision and want to invest. A business owner may be more inclined to invest, especially if they are trying to expand their own business ventures.
Times are hard in the business sphere and small businesses need to find alternative ways to fund their firms. With many small businesses in the same position, competition for funding is high so help yourself out and try alternative routes and get ahead of the game. The key is to get your business out there and sell yourself well to get funding from the private sector.