Funding your small business

Most business owners problem is not a lack of funding, as so many wholeheartedly believe. This is my firm belief from working with small to large enterprises for more than eighteen years. I feel it is very important for me to echo this belief when talking or writing about funding because without the right mindset, money management skills and processes, all the funding in the world would not make the business successful. For those companies that are legitimately at a place where funding is needed we will explore 5 avenues. A strategic session with the author can also determine where you are in your business and what it would take to get you to the next level.

1. Crowdfunding 

Crowdfunding is a method of raising funds to support a venture or project. This method seeks to appeal to friends, family, customers, and even strangers from around the world that may be willing to support what you are doing. The efforts used in a nut shell seeks to reach a large pool of people, willing to contribute however small. This method strongly uses social media and online crowdfunding platforms to reach the masses. There are four types of crowdfunding: Donation, Rewards, Equity and Lending.

Donations based crowdfunding is just as its name suggest, it is a donation. Individuals and even non profit organizations use this form of fundraising to create an awareness of a worthy cause. A donor often can relate or want to support the cause and can do so with whatever amount he or she chooses. This type is popular for funding environmental, medical, college and social causes under $10,000. This is different from all the other forms of crowdfunding because the donor expects nothing in return, outside of obviously wanting the project or cause to be successfully met because the donor felt it was a worthy cause. You can check out this Forbes article to learn about some donations based platforms by using this link: bit.ly/top10crowdfundingsites

Rewards based crowdfunding incentivize its contributors by offering varying levels of rewards based on their level of contribution, in the form of products or service; which may typically be from the business the funds are being sourced for. Because there is no financial or equity return from rewards based crowdfunding, it is a form of donation towards funding someone's business. A typical rewards based crowdfunding campaign may offer at least three levels of pledges. This type of crowdfunding is popular with projects with a tangible product needing less than $100,000. Kickstarter and Indiegogo are the more popular platforms but many more exist.

Equity based crowdfunding unlike the others mentioned earlier offers its contributors part-ownership of the business through capital investment. Therefore, equity owners receive a financial return from the company profits in the form of dividends pay out. Equity based crowdfunding is popular with projects needing more than $100,000. AngelList and Crowdfunder are among the more popular platforms but many more exist. It is important to understand your goal and the regulations for each platform to determine which one is right for you.

Debt/Lending based crowdfunding is a means of entrepreneurs raising capital without giving equity in the business. It is a form of loan repaid to the lender over a pre-established period at a set interest rate. Prosper and Funding Circle are popular platforms for debt based crowdfunding.

2. Angel Investors 

Angel Investors invest in early stage or start-up companies often in exchange for an equity ownership interest. Angel Investors were popularly described as wealthy people but that has changed to include the not so wealthy, seasoned entrepreneurs or your everyday professionals, that are interested in simply helping the next generation or can be the person with an interest in the nature of the business being offered to invest in. Angel Investing is no longer limited to monetary but can include mentorship, which can be equally valuable to ensuring a company's success. Angel Investors can be persons you know as well as persons you may not know. These individuals can be a part of a formal Angel Investors group or may simply respond favorably to your pitch. Angels tend to find most of their ventures through friends and business associates, so strategically spreading the word that you are looking for investment capital can be helpful. You never know who your Angel may be. Caribbean Investment Network and Link Caribbean are examples of formal Angel Investors platform, where you can become an Angel Investor or seek investment.

3. Ask Family & Friends 

While asking family and friends is a stand alone form of raising funds, there is a component of this in every avenue mentioned earlier. It should be more difficult to get a stranger to invest than it is to get family and friends to invest in you. If you can get the people closest to you to believe in your venture, it makes it easier to "sell". Particularly in Crowdfunding, the support and promotion of your campaign by family and friends creates a greater appeal for investment from others. There is the possibility of raising the funds you need in your immediate circle, so it may be fare to ask: Who are you surrounded by?

4. Be Creative eg. Sell before you Buy

When it comes to raising funds, the average entrepreneur leaves creativity outside the backdoor, looking and hoping for the opportunity to knock at the front. There was a group of sisters and a mother looking for funding to start a Bakery. They all baked at their separate homes for themselves and wanted to come together to open a store front together. The advice given was to 1. Be creative 2. Sell before you buy 3. Save and reinvest. The first portion of being creative was, if the mother had a large garage onto her home in a central area, why were they looking for a store front. Converting the garage could have easily be a family project that immediately eliminated having to pay rent or mortgage for the business. If everyone was already baking and selling, why not pool a portion of each person's profits to go towards the new venture. If it is a bakery and people celebrate all types of special occasions such as Anniversary, birthdays, reunions, bridal and baby showers, just to name a few; with four bakers, all knowing a minimum of 100 persons, which is a total of 400 people, if they got jobs from 10% of the people they knew and required up front payment for an average cake costing $50 that would be $2,000. Let's estimate a profit of $1,600 after deducting cost of goods sold. Surely, 4 bakers can complete 40 orders in a day. Can this method be duplicated? Another example of selling before you buy can be a book launch. I know an author who sold more than a million copies before the book was even published, of course the manuscript was finished but if you can deliver on a product or service, selling it before funding it out of pocket can be the answer to your next venture.

5. Government & International Grant Initiatives

There are Government and International grant/loan initiatives that can be considered for funding a business or project. In the Bahamas there was the Jump Start program, which was a grant of up to $7,500 offered to Bahamian citizens over the age of 30 years, seeking to establish or expand a small business. Similar programs are being considered in the Bahamas, one already launched in Grand Bahama. Inquiries can be made to the Ministry of Education, Ministry of Finance, The Bahamas Development Bank and The Bahamas Entrepreneurial Venture Fund; which are all involved in funding businesses in the Bahamas. The first two, the Government launched earlier initiatives through and are still uncertain of which ministry, if a ministry will house future programs. The development bank and venture fund however, do not offer any grant initiatives, only loans. They provide loans of up to 10,000 (this figure is not set in stone) and over $50,000 respectively. Grants.gov is a centralized website location for grant seekers to find and apply for federal funding opportunities in the US. The system houses information on over 1,000 grant programs. Caribbean Export Development Agency has a number of grant programs as well as Angel Investing on their list of funding avenues provided. There are specified types of projects that are funded, therefore research is necessary to see if your project or business aligns with what the agency supports.

Writing about funding is a huge topic with so many avenues that can be mentioned. Before you set out to look for funding let me encourage you to:

• Write your story, a video is a great way to effectively convey what you are seeking funding for.
• Predetermine what you need and what you are willing to offer to meet that funding need. Putting a proposal together can put you ahead of the game. A business plan for larger projects will be more effective than a proposal.
• You have to know the funding avenue that is right for you and further research may be necessary to determine that.

There is also the possibility of using multiple funding mediums, which is okay. Raising capital is hard work but a testament to how bad you want it. Most things that are worth it comes with some sweat to make it happen.

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