While starting a business is one thing, growing it is another ball game altogether. In fact, the latter is the more challenging scenario of the two. And what’s even more challenging? Growing your business on a shoestring budget!
Most startup entrepreneurs experience a phase when they feel that there’s a lot they can do for their business, and if only they could get a little help, their company could become larger and more profitable. While they have big dreams for their venture, they lack the monetary resources needed to pay the cost of expanding their business.
However, where there is a will, there is a way.
There are several things you can do to expand your business even though you may be strapped for cash. Here’s more on that.
1. Go Traditional
Although the rules for lending may have become more stringent, there are several banks in America that have allocated additional funds for small business lending. You could capitalize on these funds and fuel your dreams.
- Friends and Family
Borrowing money from family and friends is the easiest way to finance your business expansion. However, be careful as you do so because when you turn them into creditors, you’re jeopardizing their financial future as well as your personal relationships.
It is best advised to approach them only once you have an official expansion strategy in place. This will reassure them that their money isn’t going into the wrong hands.
To reduce the chances of unpleasant surprises, do your math beforehand and provide them with all the information they need to know, such as financial projections, and how and when they can expect to receive the returns on their investment. Also, inform them of the risks involved.
2. Give Crowdfunding a Shot
Crowdfunding has been gaining increasing popularity and can be an effective way to raise money to start a project or fund its expansion. However, it isn’t easy and will require you to dedicate high levels of effort and energy.
You will have to set a specific goal to be attained under a specific time frame, which should be short-term, say about 30 – 40 days. There are several renowned online platforms which can be used for crowdfunding.
Don’t try doing this all by yourself, though. It can take a toll on the outcome of your campaign. Build a small team of trustworthy and skillful people to help you out with the operational issues so you can focus on the strategic aspects.
Have someone to help you with troubleshooting the IT issues, someone to look after the logistics, another person to help you with promotional activity, and an accounts experts or high-quality software to help you track your money.
You will have to work hard on creating your campaign so that you can attract enough number of people to contribute to your cause. Typically, campaigners offer incentives for pledging, for example, for contributing to a restaurant owner, you may get a discount on your next 3 visits there.
3. Get an Angel Investor Onboard
Angel investors invest in new businesses by offering capital either for startup or expansion. They’re drawn to startups in a bid to earn a higher rate of return than they may get from a stock, a bond or the real estate market. When pitching your strategy to an angel investor, make sure to keep things concise, to the point and simple. Additionally, also have an exit strategy in place.
Here are a few tips that can get that angel gravitating towards your project –
- Show Experience
Thanks to the difficult economy, it has become more complicated to win over the interest of an angel. You would do well in having a few experienced members on your team, even if it is an unpaid but a highly experienced adviser. This should help build your credibility.
- Tell Them What the Company Means
Angels can easily tell whether you’re really passionate about your idea, or if it’s just a means for you to cash in on the latest business trend. So ensure you make it amply known to them as to what your company means to you and how much you want to make your ideas work.
- Do Your Homework
You’re going to need to have some important data on hand when pitching your idea to the angel. This includes market assessment reports, competitive analysis, and foolproof marketing and sales plans.
Your company may still be young, but if you want it to grow, you will have to demonstrate expert knowledge of your industry from the beginning.
- Keep Him in the Loop
The angel may not show an interest in your company at the beginning, but do keep him in the loop on big developments and successes to get him attracted to your venture.
4. Go for an SBA Loan
Thanks to the credit crisis, banks today have become increasingly disinclined towards taking chances with their money. However, do not despair, for you can always go for loans guaranteed by the U.S. Small Business Administration.
There are a few qualifications required to be able to avail these loans, which are as follows
- You will have to apply for a loan on your own from a bank or other financial institutions and be turned down as the SBA cannot guarantee loans to businesses that have been successful in procuring money from these sources.
- Your company will have to meet the government’s definition of a small business for your industry.
- Your business will have to meet all the other criteria depending on the type of loan.
- The SBA does not provide loans directly. Hence, once you’re sure that your business meets all the necessary qualifications, you will have to apply for a commercial loan through a financial institute that processes these loans.
5. Or a Microloan
You could also try applying for a microloan, which is a small business loan ranging from $500 to $35,000. You can avail this kind of a loan from a microlender – usually a non-profit organization that operates differently from banks.
Applying for a loan with a microlender, typically requires less documentation as compared to banks. They are also more flexible with their criteria.
While many wannabe entrepreneurs think that starting a business is the most perplexing thing they’ll ever experience, they soon realize that keeping the momentum going is more difficult and demanding than anything else. With business growth comes change and adapting to it is the ultimate test for any businessman. It is, however, important to find ways that enable you to keep moving forward and get to the top. I hope the above tips will help you navigate through the tough times and overcome the monetary obstacles in your way without much grief.