The Ms. CEO Show

The most popular question I’ve gotten lately is, “How do I fund my business since bank loans have dried up?”  Well, there are only two ways to fund your business—with your money or someone else’s.  A combination of both—unless you’re an entrepreneur with a solid track record—is best.

Having some of your own money (or “skin”, as they say) in the game proves right away that you have a vested interest in being successful, that you believe in your ideas and ability to effectively execute them, and that you are not asking others to take a risk when you haven’t risked anything yourself.  So, the first part of funding your business is pulling together all of the personal funding that you can put toward the venture and having it ready to launch and progress your company.  Next up: Finding ways to tap into other peoples’ money.

There are a few options available when it comes to getting money from others to start or grow your business.  Here are three:

1. Microlending Community — Check out an online peer-to-peer or person-to-person microlending community.  This kind of service makes it simple and easy for mass numbers of people to lend a little money individually—and a larger sum collectively—to help people take care of all kinds of financial matters, including starting or growing a business.  The primary concern of people on these sites if you are seeking a loan for business will be whether or not you will earn the income to then re-pay the loan.  Everyone knows the pesky statistics on business failure so you’ll need to make a convincing case for why they should support your loan.  Entrepreneurial enemy number 1 when it comes to this is the tendency to talk about how great your product or service is, how cute your company name is or to talk in general about your brand.  Not convincing.  These things are important and worth mentioning.  But your main spiel should be a general overview of how you plan to make money in your business day in and day out and how your skill set, or your team’s skill set, lend well to your ability to do what you say you plan to do.  Bottom line is, whether it’s a financial institution or a fellow hard working citizen, a lender wants to know how you will make the money to re-pay the loan.  Make that clear in your pitch.  A site where you can get started is www.lendingclub.com.
2. Investment Clubs — When the stock market was flying high there were all kinds of strategies people used to take advantage of initial public offerings (IPO) and stock purchasing, in general.  One way was investment clubs where friends got together, researched companies and pooled money to purchase stock for the club.  This cooperative approach yielded great results for well-organized, goal-oriented, properly managed groups.  With times being the way they are investment clubs are not flooding the stock market with dollars but you could get a few friends together to use the same approach to fund your business.  This isn’t something you can do with strangers because of securities laws and other governmental regulations that require people to be “accredited” (have a certain networth) before they make risky investments but it is certainly something you can do among family and friends.
3. Bootstrapping — If you can muster enough personal finances to get your business off the ground then you could always grow it through boot strapping, which basically means getting the money from your customers by focusing on sales every day or every week.  This focused activity brings money into your business that you can then re-invest to keep the business growing. This isn’t the most desirable, glamorous or easiest way to grow a business but many companies have started and made it to the next level on this concept.  Despise not humble beginnings.  With good old fashioned work ethic and laserlike focus, bootstrapping could be your funding strategy for success!

Be Encouraged,

Felicia Joy