How Do You Fund Your Small Business?


Quick Answer

To fund your small business, get a small business loan from a credit union or community lender, recommends Forbes. Large nationwide banks are much less likely to approve the loan. Small business loans usually have a relatively low interest rate, making it one of the least expensive ways to fund a small business.

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How Do You Fund Your Small Business?
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Full Answer

Another way to fund your small business is to seek investors through a crowdfunding campaign, notes Forbes. There are websites that allow you to make a pitch and then solicit donations from the public. In some cases, the money may not become available unless a goal is reached. Crowdfunding campaigns have a low success rate, but businesses with an accessible product or appealing story may be successful.

Done properly, borrowing money from family and friends can be an effective way to fund your small business, states Forbes. Structure the funding as a high interest loan for one year, and use that startup money to fund aspects of the business that can lead to more money, such as a website. Poor structuring of a family or friend loan can lead to soured relationships if something goes wrong.

Angel investors can be an excellent way to fund a small business, although they do usually end up owning a portion of the company, which can lead to power struggles, according to Forbes. After paying back a loan from friends or family members, the right angel investor can be the next step to plan for long-term growth.

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