How to Fund Your Small Business

Funding is important, but different sources may be better for you depending on your business maturity, type of business, and other factors. A lot of businesses from small to very large have used some type of funding to get to where they are today.

Many people have heard of companies such as Dropbox, reddit or Twitch. They all have something in common – they were startups from the business incubator, Y Combinator. Incubator and accelerator programs provide specific services to get a small business started. Some may offer training, office or lab space, networking, marketing, mentoring, or access to angel investors or venture capital. There are many types of services in addition that can help a small business. The purpose of an incubator program is to help entrepreneurs by growing and expanding their business.

Although a lot of attention is given to technology startups, incubator and accelerator programs also serve many other industries-such as manufacturing, medical research, or fashion. You just need to find the right program to fit your business.
There are many incubator and accelerator programs located in the United States, traditionally in major cities such as Chicago or Los Angeles. Although this list is not inclusive, there are some good examples of programs.

Incubator Programs and Startup Accelerators are designed to help a startup business by providing specific services to get them started. There are many incubators and accelerators located in the United States in different cities. Although this list is not inclusive, these are good examples of programs. To search for a program, go to a search engine and type “incubator programs” plus the name of your city.

Y Combinator

Y Combinator helps startups by investing money and moving them to Silicon Valley where they work with them to refine their ideas to present to investors. When they present their companies, this presentation is made to a hand-picked audience who is ready to invest, somewhat like Shark Tank without the sharks. YC has helped startups such as Dropbox, reddit and Airbnb. Based in Silicon Valley, CA.

Excelerate Labs

Excelerate Labs is partnered with Techstars and has a similar program to YC where a select few startups are selected for the program. The startups are then mentored to fine-tune their business idea where it will be presented at a showcase to investors. Based in Chicago, IL.

BD

BD offers an incubator program to help new medical and technology opportunities in business. They provide access to bioresearch infrastructure, laboratory equipment and the ability to network with BD scientists and business leaders. The incubator companies have between six months and two years to turn into a full business using the resources BD provides along with venture capital funding. Based in North Carolina.

Ventureprise

Ventureprise has both an incubator and accelerator program that provides services such as access to lab facilities, office space, access to interns and innovation teams. Startups selected also have access to mentors for business planning. While not directly a funding source. This incubator program can certainly propel a startup along the proper path to then qualify for funding. Based in Charlotte NC.

Crowd Sourcing by definition, is engaging a group for a common goal. Crowd sourcing is a leading nontraditional funding source by which a start-up company can ask for donations to start a business. If a person has a wide net of connections real to virtual, such as social media connections, this can be done quite effectively and quickly. Sometimes referred to as crowd funding, there are companies you can hire to consult and teach you how to utilize crowd sourcing/funding.

Kickstarter

Launched in 2009, Kickstarter has had over 11 million backers, several billion dollars pledged and over 100,000 projects funded in a few short years. Campaigns set a funding goal and timeframe – if it isn’t reached the money is returned to investors. It is mainly used for creative projects.

Indiegogo

Although similar to Kickstarter, Indiegogo offers more campaign categories and has campaigns in over 200 countries. They offer multiple funding models that allow the campaign to continue to raise money after a goal has been met-or to keep funds if the goal isn’t met.

Quirky

Quirky is a platform for invention and ideas. Users submit an idea to the community, who in turn help refine it for a piece of the profit. It has over 1 million members and over 10 million dollars in community payouts.

Fundable

Made for businesses and business ideas, Fundable offers some different funding options such as allowing funds to be raised in exchange for company equity. This might be a better option if you aren’t just looking for a reward based campaign.

GoFundMe

GoFundMe is primarily used to raise money for personal use, however the possibilities are endless. There are no set deadlines to a campaign and you keep the money that is donated.
Loans are available today from many non-traditional sources that are geared toward a small business.

Kabbage

Applying for a small business loan with Kabbage takes only a few minutes and you pay only for the money that you use. One of the benefits is that if your business is using PayPal, money can be deposited instantly. However, they do have minimum requirements such as at least one year or more in business and over $50,000 a year in revenue. Kabbage fees are between 1.5-12% of the selected loan amount.

PayPal Working Capital

The PayPal Working Capital loan does not require any credit check and is instead based off your PayPal sales. You can apply for a maximum of 18% of your annual sales. After an online application, it takes only a few minutes to get approval.

American Express Merchant Financing

American Express offers a loan partly based off your receivables for the past year and company performance. There is an online application with the choices of either a settlement advance, one-year financing or two-year financing.

Rapid Advance

Founded in 2005, Rapid Advance has supported over 30,000 American small businesses nationwide with financing and loans. They have a quick approval process that is based not just on credit but also on your business’s performance. They offer several different options for you to choose from: small business loan, line of credit, SBA bridge loan and a merchant cash advance. Upon applying, Rapid Advance will send you a quote for financing costs based on several factors including the amount you wished financed, business size, industry, etc.
Special Focus Loans and Grants are for specific groups including women, minorities, veterans, the disabled and philanthropic organizations.

NoVo Foundation

NoVo Foundation was created in 2006 when Warren Buffett donated a gift of stock worth around $1 billion. It is a philanthropic organization that looks for the best way to support change. They support organizations with grants but do not accept unsolicited proposals. Grants are awarded through consultation with experts and thought leaders to make their funding strategic.

Women’s Impact Fund

The Impact Fund gives grants to meet community needs in the arts, education, environment, health and human services. It is a philanthropic organization where its members commit money every year to support the grant fund. Although it is a women’s organization it does not only supply grants to women. They award grants ranging from $40,000-$100,000. There is an eligibility requirement such as being located and providing services in Mecklenburg County North Carolina, qualifying as tax-exempt under IRS section 501(c)(3) or as a unit of government and must wait at least 3 years if you’ve already received a grant. The Impact Fund will select specific organizations based on community need and they will be invited to submit a grant application.

SBA

Founded in 1953 the U.S. Small Business Administration has a goal of helping American small businesses with loans, contracts, counseling and other assistance. Today, the SBA includes programs for women, minorities and veterans.

The SBA website is chock-full of resources for General, Micro, Disaster, and Major Fixed Assets loans such as a purchase of a brick and mortar location or the equipment to run your business. Additional information can be found for

StreetShares

Although StreetShares helps fund small businesses, they have a focus on lending to veterans. They offer fixed rates that never increase with no prepayment penalties. They offer both loans and lines of credit up to $100,000. Requirements are that you are a U.S. citizen or permanent resident, at least one year of business or $100,000 in revenue and reasonable credit.
Programs Specific to Startups are geared towards the founding of new companies.

Startups.co

Startups.co is part of a larger group of websites that includes Fundable (listed here under Crowd Sourcing), Killer Start Ups, Launchrock and Bizplan. They review new internet startups and help them to get the audience and financing they need to be successful.

Innovation Fund America

Funding technology startups, Innovation Fund America is an option to those interested in creating jobs in their own communities. The fund does not take any equity from the startups. In exchange, the start-ups are expected to give back to the fund in the amount awarded to them so the fund can make additional investments. If an entrepreneur isn’t awarded funds they are helped by the organization to improve their business idea and re-apply.

Factoring Programs are loans based on accounts receivables or invoices that are used as collateral. That company is called a factor. Many businesses have a 30 or 60 day due date on invoices for their customers and this allows them to get money more quickly by going through a factor to advance them money.

Triumph Business Capital

Founded in 2004, Triumph has provided invoice factoring services to several thousand small and mid-sized companies. The fee for the program is decided during the application process. It includes factors such as customer credit risk, how long it takes them to pay invoices, and the estimated amount of monthly funding. There are several pricing options ranging from flat fees to variable monthly rates etc. You do not have to factor all of your invoices, however once you choose to factor a specific customer account you will normally have to factor all of that account’s invoices.

BlueVine

BlueVine offers invoice factoring credit from $20,000 to $500,000. It allows you to fund only the invoices you want after a quick online application.

Dealstruck

Dealstruck offers loans of up to $250,000 with different packages to fit the needs of your business. They provide factoring services along with inventory credit and traditional business loans for your small business.

Fundbox

Fundbox allows you to create a free account online. You add your invoices and get paid as early as the next business day. You repay Fundbox on a weekly basis by adding 1/12th of the invoice value plus a fee of around .5%-normally over a 12-week period.

Angel Investors also known as a business angel, private investor or a seed investor is a individual that will provide money to a new business. Often the funds are provided in exchange for equity in the company. An Angel Investor normally looks for a company that is beyond the startup phase and is already making revenue but that needs capital to develop a product or to propel their business to the next level. Some Angel Investors have joined organizations or networks to pool their money. Although the criteria for an Angel Investor or group of investors varies, they normally look at several areas of your business: management team, market opportunity, finances, growth potential, technology and competitive advantage. There must also be an exit strategy. Many investors are looking for ten to twenty times their initial investment depending on how risky it is. It is important to know the operational strategy and steps of how you will achieve an exit plan. Usually an investment ranges between $100,000-$1,000,000 but can vary. Also, it is typical that an Angel Investor needs to meet the SEC definition of an accredited investor by having a net worth of $1,000,000 and make at least $200,000 a year. It is easy to find an Angel Investor or group by searching for Angel Investor directories.

AngelList

AngelList connects companies with investors. You can search by country, state, or city and it shows investors and how many investments they’ve made.

Angel Investment Network

Connects entrepreneurs and angel investors. Sign up online and submit a proposal to Angels and connect with investors to fundraise.

Angel Capital Association

Although the Angel Capital Association does not directly provide funds, they provide a directory of their regions with active angel groups, organizations and investors.

MicroVentures

MicroVentures typically invests in companies that need between $150,000 and $1,000,000 in capital. Their primary areas of investment are internet technology, media and entertainment, software, mobile, social, gaming and green technology but they will invest in other areas as well. Some of their well-known portfolio offerings include Facebook, Twitter and Pinterest.

In conclusion, we have tried to bring you some of the best and most relevant resources that you may need as a startup company. We were once a startup and not too far off that path. We wish you much luck in your business. And, when you experience growth and want a helping hand, we hope you think of us at DCA Virtual Business Support. You can always reach us through our Contact Page on our website.

 

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