Lately, I have been toying with the idea of launching a product line. As I brainstorm and map my vision, I keep coming back to this one tiny problem – money. See, banks aren’t as interested in getting our dreams off the ground as we wish. With 82% of small business loans being denied by large institutions, it can feel as though our fate is in the hands of “the man.”
Luckily, that is not the case. We are a part of a generation that gets things done by any means necessary and business is one of those things.
Traditional banking institutions are not the only way to finance your vision. There are several alternatives, which you see daily, to the small business loan. Below, are some of the tried and true ways that new school entrepreneurs are going from idea to product faster than ever.
This isn’t your uncle’s friendly neighborhood loan shark. Exactly as it sounds, peer to peer lending is a financing method powered by individuals borrowing and lending money online. As opposed to hoping a big bank deems you a risk worth taking, you look to a network of thousands for financial backing.
Although it is similar to getting a loan from a friend, there are a few more requirements in place to protect both the lender and borrower. Companies such as Upstart and Lending Club, act as the middle man making the process easy and streamlined.
Like a traditional loan, you will have to apply, and your credit history will determine your interest rate. But the fees associated with these lending systems are much lower than a line of credit from a bank.
Did you know when Jay-Z couldn’t get a distribution deal, he started selling tapes out of his car? He wasn’t just trying to get heard; he was busy financing his own record label and deal. A side hustle is a job or business you start to make money on top of your current income. So, if a bank isn’t willing to give you the money and you can’t find it anywhere else; why not earn it?
Think of all the skills, talents and knowledge you possess that can be leveraged for the funding you need for your ideal venture. This method can save you the time and stress of seeking out funding from traditional channels.
Possible Side Hustles
- Part-time job in a related industry
- Freelance work
- Airbnb your home
- Being a Task Rabbit
- Dog Walking
- Drop shipping
- Network Marketing
- Working on Mechanical Turk
Please tell me you saw the guy that raised $55,000 to make potato salad on Kickstarter? If he can get people to fund ten thousand batches of potato salad, I am sure you can raise the money to ship your first product.
A way to raise funds for a particular project or venture, crowdfunding allows you to ask a large number of people for small amounts of money. Think about it; is it easier to get $1 from ten strangers of $10 from one? Unlike traditional financing, this method utilizes a fundraising method that your efforts fuel.
Many start-ups and entrepreneurs offer incentives to their donors as a thanks for contributing. From getting to be a part of the design process, deep discounts and even free goods, this method allows you to validate your concept and engages your potential audience. This financing method does require some hands-on work. You have to ask your network to get involved, maintain a consistent online presence, and prove that you are invested and passionate about your business.
If you're a fan the tech world or love the self-help industry, you have seen a landing page allowing you purchase or service or product before it has been launched. Usually, businesses find funding, create the goods and services then seek out customers, but this method is the opposite.
Several small businesses with a concept are now approaching the customer first to ask if they would invest in the product or service. If the responses are favorable, they begin asking for partial or full down payments with a delivery date in the future. You need to create an outline of your service or prototype of your product, create a landing page and start reaching out to prospective customers.
Not only does this method allow you test your concept with your target audience, but also get their feedback on pricing and features. So, instead of depending on funding from those not interested in your business, you can get your start-up cost from your own customer base.
Resources You Need
- An Idea
- Domain and sales page
- Payment portal like PayPal
- A list of your networks emails
- Marketing Plan
Contest and Grants
Who doesn’t like free money? One of the major benefits of the current entrepreneurial upswing is that several businesses and organizations are offering annual competition and grants to help fund new companies. With a little help from Google and persistence, you can find a contest for almost any industry or aspect of business growth.
Applying and participating in contest and grants do take time, but when paired with dedication, hustle, and a solid business idea, you could walk away with no strings attached cash. An additional perk, that other methods lack, a contest also offers an opportunity for you to grow your network. You will meet other start-up founders and experts who are more than willing to answer questions and help solve business issues.
One thing to consider is, most grants are focused on scientific and high-tech research and innovation. Just remember always to read the fine print to protect you and your intellectual property.
- Grasshopper’s Startup Competition Guide
- Small Business Innovation Research (SBIR) Program
- Business Owners's IdeaCafe Small Business Grant
- Fundera’s Enormous List of 107 Small Business Grants
There are several methods of funding your small business; you have to be clear on the why you need it and how soon. Every small business and owner are different. The best thing to do is seek the advice of other small business owners, your attorney and other professionals before deciding on the best financing channel for you.
Tell Me: Have you considered getting funding for your small business? Have you ever financed a new product or service? What was your experience?