In addition to a good idea and a unique product or service, a small business needs cash flow to survive. Whether you’re a beginner entrepreneur looking to start your own business, or a well-established small business owner with years of activity, you need capital.
The good news is that, even in times of global crisis, there are multiple ways to raise money. You don’t need to rush straight to a bank for a loan. You can try to get a business grant, a loan from another kind of lender, and even pitch to a potential investor. Each of these options has its benefits, and there are specific ways you can best prepare to pursue them when seeking resources for your small business.
Billions of dollars in grants are offered annually by private institutions, non-profit organizations, and the United States government. To get started on your applications, you’ll need to do some research to find the most appropriate grant for your needs.
Starting with federal grants is a good idea, as the U.S. government has many robust programs to help fund small businesses, especially in science and tech. You can check out a site like Grants.gov, where you will find all federal funding opportunities listed. The list is long, so remember that the process will require some time and patience.
Once you’ve researched federal grants, you should also look at state and local government grants as well as grants sponsored by businesses. Private grants for small businesses are often tailored to specific industries or business owner demographics.
You’ll also want to start as early as you can, as the process is generally quite long and involved, and you want your application to be as polished as possible. Here are some tips to note:
- Describe your proposal clearly and in detail. It should answer any potential questions and be easy to understand.
- Provide a balanced overview of your proposal, including practical information on how you will carry it out.
- If you feel intimidated, invite someone to help—it could be your accountant, a colleague in the same field, or a member of your team.
- Write in plain English and avoid technical jargon and spelling or grammar errors.
- Use diagrams and figures sparingly.
Besides pursuing grants, you can also seek a small business loan. Start by researching what the U.S. Small Business Administration (SBA) offers. In 2020, the SBA’s main program secured 42,000 loans, totaling more than $22.5 billion.
The SBA has several loan programs for specific purposes: you can get capital to buy land, to build or renovate, to develop or expand export markets, and for other ventures. For a successful application, follow these four steps:
- Organize the Paperwork– Your business’s financial situation needs to be demonstrated transparently through updated and accurate financial, accounting, and tax records. If your books are disorganized, no one will lend you money. If necessary, hire an accountant to help you organize everything.
- Keep Good Credit– Always pay your bills on time. Anyone loaning money to you wants assurance that you’ll pay it back, so you want to have the best credit possible. You should always work to avoid foreclosures, bankruptcies, or late payments—but pay extra attention to these things while you are seeking a loan.
- Identify Your Needs– Do you already know what type of loan you need? There are several options, and it’s essential to find the most appropriate one. This will save time in the process and avoid frustration later on.
- Maintain Your Cash Flow– To obtain any loan, you will need to prove that you have sufficient cash flow to make monthly payments. If you are starting a new business, you will need to present a detailed financial plan to prove that you will meet your obligations.
Finally, you can also try to pitch to potential investors. Many successful entrepreneurs are looking to finance good ideas, but they hate to waste time and money, so think carefully about your pitch before trying.
It all starts with captivating the investors. You will generally have very little time to capture their interest with your proposal. Instead of giving a 50-slide presentation, think of your pitch as if it were a movie trailer: it should be intriguing enough to make people want to know more in the shortest time possible.
Your pitch should include the fundamentals of your idea, details about the company’s development or product, how much money will be needed, and how much is already available. It’s essential to research the market and look for companies and entrepreneurs who may have a direct interest in your idea. If you do your research properly, you can avoid common mistakes.
Follow the Money
Access to capital is critical to the survival of small businesses. Some can fund their endeavors on their own, but when it comes time to look elsewhere for financial support, it’s important to be aware of all the options.
Although the process is bureaucratic and time-consuming, applying for grants and loans or looking for potential investors can be the main steps in the long road to having a successful business. A good proposal, a good business plan, or a good pitch are the elements that can make a difference and improve your chances of obtaining the necessary funding.