The second step of the ENDREA Method™ is [N]umbers. During this step, you want to dive into your budgets, expenses, funding, etc. Funding a business is a difficult task if you aren’t sure where to turn and what options are available for you. There are 2 main types of funding for small businesses: Debt Funding & Equity Funding. Another option for finding funds is searching out grants and awards.
These are the funding options I typically look into for my clients depending on their situation:
1) Debt Funding: Personal Funding
This is typically the first option individuals turn to when funding a business. If you have made some great investments over the years or saved up this is a great option.
2) Debt Funding: Loans
There are different loans available to small & medium business. If you are a start-up company a loan this may not be a viable option. I have not found a bank yet, that is very open to loan a start-up money. If you are an established business, getting a loan from your bank or a financial institution can be better than alternative options. This option allows you the ability to not use up your own personal savings or give up equity of your business. Depending on your businesses situation you have different options: SBA Loan, Business Line of Credit, Business Credit Cards, Equipment Financing, etc.
3) Debt Funding: Family/Friend Loan
Do you have a rich uncle? I’m sure he would love to help you out, but will he make holiday get-togethers awkward. Your support system would love to help you reach your goals. Be cautious when choosing who you turn to for assistance though. If your friend or family member is always looking over your shoulder, asking you when you are paying them or making sure everyone knows they had to help you out, they are not the right individual. Even if you become good financially because of the loan, you won’t get anywhere if you are not mentally good and have an extra stressor.
Applying for a grant can be time-consuming but also very rewarding. There are government grants available, but you have to do some research. One place to find grants is https://www.sba.gov/funding-programs/grants. If you are a minority or woman there are more grants available for you to apply. If you don’t have the time or knowledge of searching out grant money there are professionals that can do the work for you.
5) Equity Funding: Investors
This option is normally not a good fit for small businesses unless they have a strategic plan to grow rapidly and need the funds to do so. When receiving money from an investor you are awarding them equity into your company, so this is a long-term relationship. When choosing investors, you want to treat it like a relationship you will be in for a long period of time. Some investors come to the table with a lot of ideas and want to change your goals and plans for the business, is that something you are ok with? Other investors come to the table with a lot of extra experience that can assist you in growing the business, so they are bringing much more than just their money.
These options are just a quick overview of what is available and where to look when your business needs some assistance. We can talk through your plans and figure out the best option for you and your business.