Small Business Financing Strategies

Brian Roberts — Mon, 21 Feb 2011 18:22:31 +0000

In these tough economic times, it can be difficult to obtain funding through the usual channels of lending. Fortunately, there are many nontraditional sources of funding which other small business owners have relied on in the past, and which you can use to your advantage. Here are just some of the resources you might want to consider:

1. Friends and family
2. Many small business owners have used funding from friends/family to get their small business off the ground. If you are going to go this route, it makes sense to have a written agreement specifying the terms of the loan, repayment, interest, and so on. This can prevent many arguments and hurt feelings if the business struggles early on. It also creates clarity for the small business owner as to whether or not the business can be a profitable operation. Barter with other small business owners
3. Through barter, it is possible to find another business owner whose products/services can be exchanged with yours. However, as with the friends and family option, you’ll want to specify in advance what the terms of exchange are, preferably in dollar figures for services performed. Keep in mind that the exchange need not necessarily be a 1:1 exchange; for example, if you really need advertising, you might make an advertiser a 1.2:1 exchange in their favor. Yet, by the same token, if one of you has to perform special services to complete a barter transaction, make sure that any contract reflects that these costs will be extra. Special offers to customers
One final method for funding can come from offering customers discounts for volume purchases, advance orders, and similar agreements. You should especially look for minor benefits which can be provided at low cost (or no added cost) to the customer, and use these freebies to make your special offer more enticing. Even if you have a service, the same basic principle can apply through the use of gift certificates or free consultation. Just be certain that there is an eventual expiration date, or some other adjustment for when your expenses increase.

In summary, with a bit of shrewd planning, many sources of funding can be found which are atypical, yet highly useful to the new small business owner. Still, when creating any contract, it is strongly recommended to have an attorney review the terms and conditions of any agreement so that common pitfalls are avoided.

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Small Business Financing Strategies