I am often asked by business owners where the “free” money is to operate their business. The quick and true answer is that there is no “free” money.
First Things First
Before beginning your search for funding, you should determine how much you will need, what you will use it for, how you will pay it back, and what sources you need to look to in order to finance your business.
It is a good idea to figure out what inventory and equipment you already have, what you need to purchase or lease, and how much it will cost. The next step is to determine or estimate how much it will take to keep your business running. You should consider the cost of your business space (even if you are operating the business out of your home), cost of business supplies, insurance, utilities, employees, licenses, advertising and unexpected costs.
Once you have determined what you need, you should think about where to locate the kind of financing needed to get the business up and running. Start with you; how much money are you able to put into the business? Are there family and friends who believe enough in you and your dream to provide some financing? Once you have exhausted this list, you will need to think about other financing options.
The following is a short list of some financing options a business owner might consider:
Crowdfunding– As the name implies, crowdfunding is where a large group of people (like you and me), fund projects with their own money. Crowdfunding was created as part of the American JOBSAct, allowing online sales of small stock to a large number of investors. Indiegogo, Kickstarter, and SoMoLend are examples of crowdfunding platforms.
Angel Investors– Individuals can also provide capital for a business startup, usually in exchange for convertible debt or ownership equity. These investors will typically provide advice to these companies. TechColumbus Angel Fund is one such group of investors for the information technology sector.
Community Development Corporations– These nonprofit organizations work to help residents in impoverished areas improve their quality of life. Some, like the Economic & Community Development Institute and Increase CDC, work with microentrepreneurs to assist them in developing their own small businesses.
State Small Business Credit Initiative– The state of Ohio received $55.1 million from the U.S. Department of the Treasury to encourage lending to small businesses. The majority of these dollars, made available to banks and credit unions through the Collateral Enhancement Program and the Ohio Capital Access Program, increase the amount of credit available to Ohio’s small businesses.
Finally, irrespective of the funding method, a business owner must be able to prove their credit worthiness and how they will repay the loan. Some lenders may provide assistance to increase the owner’s credit score and provide small loans initially. Most lenders will utilize a variety of funding streams in order to “package” the loan for the borrower.
Where Can I Get Help?
The Columbus Chamber’s mission is to help businesses thrive in the Columbus Region. We’re happy to connect you to resources that match your business’s needs. Just call us.
The Columbus Chamber recently hosted a free webinar on Funding Opportunities for Small Businesses that is available on demand.
For more information about financing your business, please contact Somers L. Martin, director of business development services for the Columbus Chamber, at 614-225-6919.