You’re probably well aware that banks aren’t exactly lending to small businesses right now. So, if you are looking for capital to start or further fund your small business, and you can’t find a bank willing to provide financing to you, don’t fret. There are a number of different places you can go to receive funding. In fact, it’s easier than ever to get “non-traditional” financial help for your business. Here are five ways to fund a small business without the bank’s help:
- Ask your family members and friends to support your idea. Seek out people who are willing to buy into your ideas and passion. Work out an agreement with them so that everyone benefits from the loan. Make sure to get everything in writing. They may be your family and friends but they still deserve the same respect you would give a business partner or investor. The Small Business Administration (SBA) offers 6 Tips for Borrowing Start-Up Funds from Friends and Family. For example, the SBA recommends borrowing specifically from a family or friend with solid business skills. They’ll be able to understand the risks and rewards better than someone with unlimited cash and no business experience.
- Launch a successful crowdfunding campaign. Websites like Kickstarter.com, Indiegogo.com, and GoFundMe.com are popular places for small businesses and inventors to raise funds. By offering some type of incentive for donating to a campaign (i.e. first dibs on a new product or service at a discounted price or collector’s memorabilia for supporting an idea or concept), new entrepreneurs are able to create believability in their businesses as well as a buzz online as people rush to fund the latest and greatest new projects out there.
- Borrow from your 401(k) plan. Although it’s not always recommended, borrowing money from your retirement plan is an option. It is not, however, one that comes without consequences. If you cannot pay the money back right away, you’ll be subjected to penalties and fees. You can rest assured that the interest rate you’ll be paying will be competitive to that offered by a bank, but you need to compare that low interest rate with the market appreciation you are missing out on. Only use this option as a last resort.
- Search for a peer-to-peer loan. There are a number of different peer-to-peer lending sites available online. Each has its own list of requirements so it’s very important to read all contracts and agreements in their entirety. Pay close attention to the fine print. If something seems too good to be true, it often is. Know the terms and conditions of the loan before agreeing to it. Some places to find peer-to-peer loans include Prosper.com, LendingClub.com, Upstart.com, and Peerform.com.
- Seek out programs designed to help endeavors like yours. Grants.gov is one possible place to find funding for your business, depending on what your business does. Another option is to check out something like the FedEx Small Business Grant Contest. A number of different prizes are awarded to small businesses, based on their answer to this question: “If you were given $25,000 to spend on your business, what would you do with it?” Hint: creativity helps! The largest prize, $25,000, was awarded to Darn Good Yarn, a home-based business in Sebec, Maine.
You don’t need a loan from a bank to get your small business started. Do what many new entrepreneurs do and borrow from family and friends, launch a successful crowdfunding campaign or apply for a peer-to-peer loan. You won’t know which will work for you if you don’t give each option a try.