The other weekend I attended a WE NYC class on funding. I’ve always been curious about ways to fund a business through loans or other options and it really demystified the process of small business loans. I remember learning in another class a few years back that small business loans were impossible to get and I left feeling a little frustrated. I haven’t yet decided to get a loan to grow my business but its something that I’ve always been curious about if the opportunity presents itself. I thought I’d share what I took away and key points.
I honestly always thought that the only way to get a business loan was through a conventional banks but the class opened up my eyes that there are many other alternatives. I knew about crowdfunding. I’ve personally done a Kickstarter and IndieGoGo when I first launched my business. There is also the family and friend route. One option that I had no idea that existed was Community Lenders. In this category is community development financial institutions (CDFI’s), credit unions, and community banks.
What is a CDFI?
I had honestly had no idea what a CDFI was until this class. To break it down it is a financial institution that provides credit and financial services to underserved markets and populations. The class I took was taught by people who work at BOC Capital. They are dedicated to providing micro-enterprise financing, with a special focus on small-business, women, minority and immigrant entrepreneurs.
They offer loans up to $25k for businesses that need order-based loans. These loans would be to finance production costs related to purchases orders or cash outlays required to fulfill contracts. They also do short-term loans and longer term loans up to 3 years. On top of all this they also help prospective borrowers with business planning, early stage develolpment and business expansion
Another option that we discussed was Micro-Loans. They recommended checking out KivaZip which is an international non-profit organization that celebrates and supportspeople looking to create a better future for themselves, their families and their communities. They do this by offering a platform that lets people lend money up to $10,000 via the internet with 0% interest to entrepreneurs. KivaZip has a market of 1.6 million supportive lenders. After you repay your loan you also will be building business credit as well since Kiva reports your good standing.
IndieGoGo, Kickstarter, there are lots of ways to get together a group of people to donate to your business. Find a crowdfunding platform, set the goal amount, deadline, and any rewards offered to donors. You usually must raise 100% of your goal before the deadline which is usually 60 days, or all the donations are returned to the donors.
Friends and Family
If its an option for you reach out to Friends and family. With family money can be stressful so it is recommended to come up with a contract and lay out clear terms.
Sometimes striking it out alone can be overhwhelming. By partnering with the right business partner you can leverage two sets of minds and perhaps streams of income to get some skin in the game with your business. It is always recommended to set up a business partner relationship with a contract. Make sure you and your business partner both have seperate lawyers who are looking out for you while you draft this.
Whatever way you choose to finance your business I know how much work it is! I’d love to hear about how you got your start or what you are dreaming up! Let me know in the comments below!