You need not rob a bank – Entrepreneurs have a growing number of options in terms of how to raise money for a small business, ranging from BDC loans to Crowdfunding, going public in the traditional sense, and even creating an Initial Coin Offering (ICO) in the crypto world.
It is easier today to set up a business, get funding and deliver a service or product than ever before. As more entrepreneurs realize this, they figure out they can raise $1 million in 12 months. All they need is an idea and a business plan to make it happen.
In order for an entrepreneur to tap into this funding, they need to ask themselves a few basic questions. What market are you serving and who are you serving in this market? How do you do it better than any other company in the same market?
Now how do you get started as a small business entrepreneur?
First – formalize your business.
Define your articles of incorporation. Find a standard version of one and update it, or hire an attorney to do so. And don’t automatically incorporate in your home state. There are advantages and disadvantages to incorporating in each state. Much of the time, incorporating in Deleware may make the most sense and can be quickly worth the slightly higher cost of doing so.
File the articles of incorporation with the state where you want to incorporate. Get a federal tax ID, if you are going to be paying sales tax. Currently, Delaware has more than half of all corporations registered there, for tax and legal reasons.
Fill out a government SS4 Application for free to get your companies tax ID.
Go to the bank and open up a business account with your state registration, your articles of incorporation and your Tax ID.
Now that you have these pieces done, it is easier to get funding for your company.
Be prepared to answer questions like:
Why do you need the money? How are you going to spend it? What are you offering an investor in return?
Then ask yourself how do you want to raise money for a small business?
Traditional venture funding is still a good option. It provides expertise and guidance to help your business along. It may be wise to explore local and virtual business accelerators. The time saved on not making strategic or legal mistakes early in your startup may be worth a King’s ransom later when it is more difficult to pivot or change. Incubators provide expertise – advise from people that build businesses and grow them as a profession.
With new and clearer regulations with respect to crowdfunding, new channels have opened up for startups. They provide flexibility and control at lower costs.
In this new market some entrepreneurs are looking into cryptocurrency, but with significant costs working with the SEC to get an ICO approved.
How are you going to communicate clearly to investors?
Investors may want to see all the information before they engage. They will want to meet you, rather than seeing a flashy video of your product or service. You can have a more personal video telling your store to potential investors. They not only want to know about the product, but they also want to know you and the team as well.
be well documented – have a clear plan for Use of Proceeds (UoP) for your capital raise, and as clean of a Capitalization Table (Cap Table) as possible.
Having all these measures in place doesn’t guarantee you funding but it does make you look more attractive to any potential investor.
How to Raise Money For A Small Business
Sonia Rina Davies is a passionate entrepreneur, speaker, author, and personal development coach. She is an outspoken advocate of the free market economy and has helped countless clients identify their core values, envision and realize goals that resonate with those values. She oversees several businesses both online and offline.