How to Fund Your Small Business

How to Fund Your Small Business
5
min read
September 29, 2022

Whether you’re launching a new business venture or your small business has been operating for some time, the truth is, “raising funding is always difficult,” says Tom Sagi, co-founder and CEO of Hourly.


But just because getting the funds you need to keep your small business moving forward is difficult doesn’t mean it’s impossible. Sometimes, it just requires getting a bit creative.


So what, exactly, does that creativity look like? We asked Sagi (and a few other small business owners) for their insights on how to raise funding for your small business. Here’s what they had to say...

Target the Right Business Lenders

One of the most common ways to raise funding for your small business is to take out a business loan or line of credit.

If your small business is already profitable, you can definitely go after a loan or line of credit from a traditional lender, like a big bank. “Banks mostly want to see a positive cash flow and steady profits,” says Sagi. "They really look at the size of the business’s revenue—and agree to lend based on that revenue.”  


But if you’re just starting out (or your business isn’t at a high level of profitability), getting approved by a traditional lender may not be in the cards. But not to worry; just because you can’t get a business loan or line of credit from a traditional lender, doesn’t mean you won’t be able to get a loan or line of credit at all. You just need to target different lenders.

 

And the Small Business Administration—better known as the SBA—is a great place to start. 

The SBA has a number of business loan and grant programs designed to help small business owners. Examples of some of the loans or grants you may qualify for through the SBA include:

 

The point is, the U.S. Small Business Administration has a number of programs in place to get funding into the hands of small business owners—and, if you’re looking to fund your small business, they’re definitely programs you’ll want to explore. (Just keep in mind that, when applying for a business loan, you’ll need to offer a personal guarantee.) 

Consider Leveraging Your Personal Credit

Whether through a traditional lender or the SBA, getting funding for an existing small business can be tough—but getting funding for a brand new business is even harder.

 

“For a brand new business, it's extremely hard to raise any funding or get any debt financing,” says Sagi.

 

If you find yourself unable to secure a loan or credit for your business, one option to consider is securing a personal loan or line of credit.

 

With a personal loan or line of credit, you can use the funds however you’d like—but instead of the burden of debt falling on your business, it falls on your shoulders. “You can give the money to the business and use it, but it's 100 percent your responsibility to repay the debt,” says Sagi. 

 

In order to get a personal loan or line of credit, your finances need to be in order. When determining whether you’re a qualified candidate, “they look primarily at your credit score and what your salary is,” says Sagi. They’ll also look at how much debt you’re carrying in comparison to your income—so, before you apply, make sure to go over your finances, review your credit report, and put yourself in the best position possible to be approved (for example, by paying off other credit card balances or correcting any mistakes in your credit report).

 

Applying for a new credit card could also be a way to cover costs for your new business. “If you don't mind paying higher interest rates to a credit card, they can be a great way to get some funding to launch your small business,” says Sagi,

Tap into Your Network

As a small business owner, you may not be able to catch the attention of sophisticated  nvestors, like VC firms. But there may be people a lot closer to home that’d be willing, able, and excited to invest in your business.

 

Tap into your network and see if there’s anyone that might want to invest in your business, whether that’s friends, family members, or colleagues. 

 

The key to success with tapping your personal network for funding? Set crystal clear expectations. What are the terms of the investment? How and when will you pay them back? And, most importantly, what happens if you invest their money into your business—and then, for whatever reason, the business doesn’t succeed?

 

“Everybody wants their business to be super successful, but keep in mind that there is a chance that the business will not survive,” says Sagi. “You may not be able to pay that money back. I know it sounds gloomy, but that’s the reality.”

 

As long as everyone is on the same page, your friends, family, and personal network can be a great way to fund your business—so, if you’re going to explore this option, just make sure to get on the same page and set clear expectations from the get-go.

Small Business Owners Share Their Creative Funding Ideas

Want some more creative ideas for funding your small business? Here are a few additional tips and strategies from more small business owners:

 

 

Use These Tips to Get the Funding You Need

Funding a small business can be challenging—especially if you don’t know where to start. But with these tips, you have a great starting point to find the funding you need to take your business to the next level. So what are you waiting for? Get out there and find that funding!

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