How to Secure Financing for Your Small Business Tricia O'Donnell Photo by Yan Krukov The U.S Department of Labor’s JOLT January 2022 report reiterates that “The Great resignation” is not slowing down anytime soon, as almost 4.3 million people have quit their jobs. The after-effects of the pandemic and the rise of remote work have significantly impacted the labor market. Many people who quit their jobs aren’t searching for new jobs. Instead, they have ventured into businesses of their own. The U.S. Census Bureau’s data graph for business applications shows a significant jump in 2020. Importance of Finance to Small Businesses Smooth Business Operations Business Growth Profit maximization: Ways to Secure Finance for Your Small Business Community Development Finance Institutions (CDFI) Crowdfunding Grants Micro-financing (MFI) Peer-to-peer lending: Importance of Finance to Small Businesses Finance keeps everything going for any small business – from purchasing raw materials to processing, production, and distribution. Business finance should be at the top of mind for any small business owners. Here is why: Smooth Business Operations With excellent staff and high-quality products, your business still needs finance to keep business operations running smoothly. Bills have to be paid, employees are entitled to remuneration, and production needs to continue to meet demands. All of this is only made possible if there is finance available to facilitate the smooth day-to-day running of your business. Business Growth Every small business owner dreams of growing at a steady pace until they hit their business expansion goal. Growth can cover increasing production capacity, increasing customer base, or expanding to other business activities, or even into new markets. Without a suitable financing structure, business growth can become nearly impossible for your small business, which could make it difficult to keep up with your competitors. Profit maximization: There’s a general saying that goes like this: “You have to spend money to make money.” This statement is very relevant for many small businesses. The amount of money you invest into your business can directly impact the profit you make. When there is little money to spend on purchasing high-quality raw materials, marketing, sales, and other business activities that affect revenue, it can be hard to hit the profit mark you desire for your business. Let’s face it: financing is the life-blood of many small businesses, especially in their early stages, and can be critical to helping newer small businesses to succeed in a crowded market. Read on to find out more about how to secure the financing that your small business needs. Ways to Secure Finance for Your Small Business Here are some alternative financing methods that you could consider: Community Development Finance Institutions (CDFI) CDFIs refer to private institutions that provide affordable lending options and funds for low-income earners, small businesses, and disadvantaged communities that need capital investment. Although CDFIs also consider businesses with good credit scores before granting access to financing, they are more considerate in their approach, unlike most traditional banks that reject many startup businesses for low credit scores. Crowdfunding Crowdfunding is the process of raising funds for business ventures from people via online platforms. The benefit is that you do not need to seek out capital from a single investment source or individual, but rather, you can cast a wider net. Some common crowdfunding platforms include Kickstarter, Indiegogo, and Crowd Supply. In January 2021, Kickstarter raised over $5.6 billion worth of business finance for 197,425 tech and creative business projects. Grants The government and institutions that support the government’s vision through grants provide funding to businesses that meet certain requirements. Grant recipients must agree to the terms and conditions to get the funds. You can find grants from the government at Grants.gov. Grants are technically free but are more competitive, usually take time, and the process can be long and slow. Remember to check the eligibility criteria for available grants to ensure your business qualifies before getting started with time-consuming applications. Micro-financing (MFI) Micro-finance institutions provide loans for individuals and small businesses with no access to traditional banks, or which otherwise do not meet the conventional bank loan requirements. It is also referred to as micro-loan or micro funds. Although MFIs mostly give out loans for productive purposes, they also sometimes provide business guidance on utilizing the loans for maximum business results. An example of a microfinance institution is Kabbage, which offers loan options of up to $50000. Peer-to-peer lending: Peer-to-peer lending, also known as P2P lending, usually happens on finance platforms that link entrepreneurs with individuals or enterprises willing to provide the financing they need. P2P lending offers funding without the need for a third party or intermediary. Lenders and the recipients transact directly. Examples of P2P lending platforms are Lending Club, Prosper, and Funding circle. Getting a small business up and running without adequate finance is tough, and we hope that this list gives you some ideas on where you can start with looking for the funding you need. But securing funding is just one step in building a successful company. We know that running a small business can be overwhelming, and that’s why we created BenchmarkONE. Our sales and marketing software is designed for small business owners like you to run campaigns, capture leads, and measure results. Are you ready to hit the ground running? Sign up for a free BenchmarkONE account to get started.