Starting a small business can be an exciting venture, but it can also be a daunting one, especially when it comes to securing funding. According to a report by the Small Business Administration (SBA), small businesses represent 99.7% of all employer firms in the United States and create about 2 million jobs each year [1]. However, many small businesses struggle to find the necessary funding to launch or grow their operations.
1. Traditional bank loans
One way to fund a small business is through traditional bank loans. According to a survey by the National Small Business Association (NSBA), 60% of small businesses use bank loans as their primary source of financing [2]. However, qualifying for a bank loan can be challenging, especially for new businesses or those with poor credit.
2. Alternative lending
Another option is alternative lending, which includes online lenders, peer-to-peer lending platforms, and other non-traditional sources of funding. According to a report by the Harvard Business Review, alternative lending has grown significantly in recent years, with online lenders alone providing over $10 billion in loans to small businesses in 2018 [3]. Alternative lending can be a good option for businesses that have been turned down by banks or need funding quickly.
3. Croudfunding
Crowdfunding is another popular way to fund a small business. Platforms like Kickstarter, Indiegogo, and GoFundMe allow businesses to raise money from a large number of people who contribute small amounts of money in exchange for rewards or equity. According to a report by Crowdfunding.com, the global crowdfunding market is projected to reach $300 billion by 2025 [4]. Crowdfunding can be a good option for businesses that have a strong social media presence and can create engaging campaigns.
4. Venture capital
Venture capital (VC) is another way to fund a small business, especially those with high growth potential. According to a report by the National Venture Capital Association (NVCA), venture capitalists invested $107 billion in startups and emerging companies in 2019 alone [5]. VC firms typically invest in businesses that have a proven track record and strong growth prospects.
5. Bootstrapping
Finally, small business owners can also consider bootstrapping, which means financing their business themselves through personal savings, revenue from early customers, or by cutting costs wherever possible. According to a report by Entrepreneur, 78% of entrepreneurs use their own savings as their primary source of startup capital [6]. Bootstrapping can be a good option for businesses that don't need a lot of upfront capital or have a slow growth strategy.
Conclusion
In conclusion, small businesses have several options when it comes to funding their ventures. Whether through traditional bank loans, alternative lending, crowdfunding, venture capital, or bootstrapping, there are ways for entrepreneurs to secure the necessary financing to launch and grow their businesses. It's important to do your research and consider which option is best suited for your unique situation.
Sources:
[1] Small Business Administration. (2020). Small Business Trends. Retrieved from https://www.sba.gov/tools/sites/sba-com-content-corporate-hr-employee-bd-SDVO-regulations
[2] National Small Business Association. (2019). 2019 Small Business Policy Platform. Retrieved from https://www.nsba.biz/wp-content/uploads/2019/09/2019-Small-Business-Policy-Platform.pdf
[3] Harvard Business Review. (2018). The Rise of Alternative Lending for Small Businesses. Retrieved from https://hbr.org/2018/04/the-rise-of-alternative-lending-for-small-businesses
[4] Crowdfunding.com. (2020). Crowdfunding Market Size, Share & Growth. Retrieved from https://www.crowdfunding.com/market-size-share-growth/
[5] National Venture Capital Association. (2020). 2019 Venture Capital Investment Report. Retrieved from https://nvca.org/wp-content/uploads/2020/07/2019-Venture-Capital-Investment-Report.pdf
[6] Entrepreneur. (2018). How to Bootstrap Your Startup. Retrieved from https://www.entrepreneur.com/article/314724
