Of course, finances are an issue for any entrepreneur, whether you’re starting a brand new business or need to increase cash flow in an existing company. According to this year’s survey of women business owners by NAWBO and Web.com, access to capital is one of the chief concerns. And what do we entrepreneurs do when a road is blocked?
We may plot a way around, through or over, but we don’t let obstacle stop us from forward progress! Here are 4 ways women are finding money to start businesses or fund projects within their established companies.
Get a Business Partner
When we talk about business partnerships, we’re often discussing them as they exist after they are formed. The phrase brings to mind a 50/50 partnership where both partners have an equal financial investment, do an equal amount the work and share profits down the middle.
This isn’t necessarily the case. There are times when one partner primarily finances the initial operations, like an investor, but more like a board member, advises, guides, and may do some of the administrative, marketing, or business development work, while the other partner is more hands on in day to day operations.
Or, in the case of a silent partner, they may buy into the company financially, but have no authority over how the company is run. Why would anyone do this?
Profits. For an agreed-upon return, they may be willing to risk partnering with you based on their positive prior knowledge of you, the strength of your talent or your current operation. Especially if you can show that you are profitable on your own, and how additional funding will help.
If you know someone who isn’t as knowledgeable about your industry, but can contribute in other ways, it may be a good idea to team up with a partner.
To get started: Start with people you know. Be prepared to share your business plan and ideas for growth. They’ll also want to know how much it is to buy in, how you see their role, and what the exit plans are – both for if they are unhappy three years from now, and for the business overall.
Working with people you don’t know is riskier, but with the proper due diligence, a bit of networking may find you the perfect person to share the load.
Invoice Factoring or Business Factoring
If you have a few steady clients, but have realized there would be various advantages to having money come in within a few days instead of up to 90 days, you could try invoice factoring, also known as business factoring.
Basically you’d be selling an invoice that is coming due to another company that advances you a set percentage of that invoice immediately and the rest when you collect. Instead of looking at your credit, that company looks at the credit of the people you’ve billed.
It’s a form of financing, so there are fees involved, some that are often levied per invoice. There are risks involved too (what if your client doesn’t pay?), but if there’s a big enough advantage to having cash now, this could help.
To get started: You’ll want to research as much as you can about invoice factoring before you make a final decision, as usual. (Google “business factoring” instead if you’re in the UK.)
When you do, double check the reputation of the company you intend to use, and read what other businesses are experiencing. You also will want to have a plan in place for how the money will be spent when it arrives earlier, particularly if the timing of the influx of cash provides additional advantages.
Microfinancing may be the answer to your problem if you need a smaller amount of money to get started and like the idea of receiving money from an entity more like a peer than a bank.
Instead of getting the entire loan from a one place, you may receive it from several sources, coordinated by a central agency, that acts as a conduit between the marketplace of borrowers and lenders.
In January 2013, Kiva, which originally facilitated microfinancing in developing countries, partnered with ACCION USA and Opportunity Fund to do the same thing with American entrepreneurs. Currently, US entrepreneurs can borrow via the Kiva Zip program.
To get started: The easiest way is to go to the Kiva website, or any of the other reputable microlending sites for Americans and sign up. As part of your preparation, browse the site and observe how other people are presenting their businesses, and how close they are to their goals. Do projects that attract more or faster funding have something in common?
Don’t forget to alert supporters you may already have that you’ll be doing this – perhaps they’d be interesting in financing your idea as well.
There are lots of conventional roads to business financing including
leveraging personal savings and credit
– to name a few.
The more traditional a method is, however, the more likely it is to need the backing of a strong personal financial history or other conditions some entrepreneurs may not be able to meet, or have reasons to avoid. The very act of opening a small business is unconventional- perhaps financing options that are out of the norm are an idea whose time has come.
Image courtesy of Flickr user SalFalko