There are four traditional methods for funding your business.
The financial crash has changed the very fabric of how small business owners fund their businesses but a lot holds true about the four methods for funding your business.
Let's look at what those four traditional business funding methods are:
Traditional Business Funding Method #1 - Small Business Loans. Effectively the small business loan program through the SBA has become so tough to get that while we cannot declare it dead, they are on very limited life support. The SBA business loans have been replaced with a spectrum of business lending products, and the private sector has more than filled the void.
Traditional Business Funding Method #2 - Venture Capital. Many business owners have the mistaken idea that Venture capitalists will be interested in their business or idea. Venture Capital typically starts at a five million and over. They invest in projects or businesses that can show a proven track record of success. Venture Capital investments are seeking a 50X return on their investment in a 3 to 5 year time span. Venture Capitalists tend to work on a referral basis only. They invest in very niche areas; such as new technology, manufacturing, or biotech. Venture Capitalists normally want a controlling share of the companies in which they invest.
Traditional Business Funding Method #3 - Angel investors. These are tend to be private individuals or investors groups who want to invest their money into businesses that have the potential to make at least 10X returns. They usually take a minority share of the company and leave the control with the business owner. Angel investors typically invest close to home and in business markets that they know very well and have contacts in that can help grow the business.
Traditional Business Funding Method #4 - Public or private grants. Yes, everyone is looking for the free handout. The truth is that it simply does not exist for the average business owner. Qualifications for grants are very strict and mostly for goods, services, or research the falls under the public interest domain. They are hard to find, they have a long very involved application process, and very few are approved. If you qualify for a grant and submit an outstanding proposal, your odds of being funded on that grant are about the same as winning the lottery.
The good news is that when you complete the business finance pre-qualification test you will know which business funding programs are available to you right now and what steps you need to take to pre-qualify for more in the near future.