Don’t let anyone tell you otherwise, raising money is hard. Even in Silicon Valley, where it sometimes feels like every company is raising at a $1 billion valuation, it’s still difficult to get in front of the right investors. Even if you’re lucky enough to raise a round, you risk diluting your equity stake. Thankfully, there are other ways to fund your business without selling your equity. In this post, we highlight five non-equity ways to fund your business.
There are numerous hackathons, business plan contests, and relevant awards for small businesses and startups around the country. The trick is to find the one that makes sense for your business. There may be specific contests for your alma mater, city, or state. Check your school’s center of business or entrepreneurship or your city/state economic development center to see if there’s a contest right for you.
For a list of different awards you may qualify for, check out our post on The Ultimate List of Startup Competitions, Hackathons, Business Plan Contests, Grants, and More.
Grants and benefits
According to the Foundation Center, the top 1,000 FC grants gave out more than $22 billion in 2012. Whether it’s a foundation, school, or the government, there’s a lot of grant and benefit money available for small business owners. But where do you start? Fortunately, there’s a site for that. In 2011, the White House issued a presidential memorandum to make it easier for businesses to have access to all the government services available to them through a one-stop shop called BusinessUSA.
The Small Business Administration provides various loan programs for different purposes. Their most popular loan program is the 7(a) Loan Program. If you’re a small business operating at a profit, you may be eligible for the 7(a) loan. For more information on eligibility, check out the SBA site. There are also other loan programs, including a microloan program, real estate & equipment loans (CDC/504), disaster relief loans, and more.
For a full list of SBA loans, click here.
Do you have predictable receivables? Then you may be eligible for a traditional bank loan. But what happens if your business has some seasonality or inconsistent cash flow? Then you may want to consider invoice financing. As we discussed in a previous blog post, invoice financing is an alternative to a traditional bank loan. With invoice financing, you can get cash upfront for for a relatively small fee.
Perhaps the most “popular” way to raise money nowadays is through a crowdfunding platform like Kickstarter, Indiegogo, and Tilt. Whether it’s potato salad or a $2 billion virtual reality headset, there’s no shortage of ideas (and potential backers). But for every amazing crowdfunded story, there are hundreds of products that don’t close on their goals every day.