Small Business

How to Secure Fund for Small Business Financing

Published on: July 30, 2019

Last Updated on: December 6, 2021

Small Business Financing

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Getting money to finance your small business can be challenging most times. There are many aspiring entrepreneurs with awe-inspiring ideas that lack the capital to turn these ideas into a tangible business.

This is because they are often turned down for bank loans as banks loans are mostly for businesses with operating histories. Small business ideas should often be started with a proper budget.

Most probably, starting up a small business is often much more difficult if you have fewer funds. Therefore, investing in an online business seems to be the right option at first. Not only that, but an online business can also get you a lot of audiences than you should have gotten if you were to set up a brick-and-mortar store.

Even if your business is already operational, you may need to raise capital to expand or you may need it to survive tough times. But securing such funds can still be very tough most of the time for small business ideas.

You can avail of a business loan from your known bank and if you are not eligible enough to avail a loan from the bank, you better start with an online business with whatever fund you have got and start to work on the 5 C’s of credit of your business for a near-future loan.  Trying to reinvest the revenues collected from online selling can help you to further expand your business without the help fo an online loan.

Thankfully, there are many alternatives to secure a loan with requirements that are not as stringent as those of banks. Here are a few of these alternatives you can turn to when you get a no from the bank. However, it is also possible to invest in some growing businesses. You will get all the business news if you have a keen eye towards it.

How to Secure Fund for Small Business Financing:

1. You can raise funds with your assets:

If you have a small business or a beautiful idea with profitable prospects but lack the required capital to implement, one of the ways to raise funds without the banks is to take inventory of your assets to uncover resources you did not know you had.

Assets such as equity in real estate, vehicles, personal belongings, savings accounts, retirement accounts, etc. You may decide to sell some assets to raise the required capital when the bank loan option is not feasible.

However, sometimes personal loans also work if you got any mortgage to provide. A mortgage loan is much easier to get because it comes with a mortgage which immunizes the applier to get funds.

2. You can raise money from your family and friends:

Family and friends are one common way most start-ups finance their businesses. Funds from family and friends can be a grant to support your business or an interest-free or lower interest loan. However, it is important to note that if it is a loan, it may jeopardize important personal relationships.

To avoid it, you should supply formal financial projections, as well as an evidence-based assessment of when you will repay their money, and most importantly, you need to highlight the risk involved. This shows you take their money seriously. Not only that, try to keep a good relationship with your existing customers. Sometimes, them buying from you also helps in small business financing.

3. Equity investment:

Equity in business terms simply implies proprietorship (ownership). Equity investment is one easy way of financing your small business without a bank loan; this is when an investor makes money available in exchange for a share of ownership of the business.

Equity investment includes any money from individuals, including you, friends or relatives, business partners, or stockholders. These funds are not secured on any of your business assets. Equity investment often leads to the creation of partnerships.

It is because they also have invested in your small business ideas. If you agree with such terms then it is very important that you choose your partner wisely. So that both your business and your funds remain secure.

4. Cash advance:

Cash advance makes money easily available for your small business; though this is mostly applicable to operating businesses. Cash advances such as are an alternative financing source that can provide you with a one-time lump sum of cash in exchange for a set percentage of your future sales.

You can repay this advance daily by having a percentage of your credit and debit card sales deducted from your account until the amount is fully paid. Factoring is another cash advance you can consider depending on your business needs.

But for that, you need to determine whether this business is going to work or not. There are, of course, several small business ideas that sound good but do not actually work in real life.

A Small Case Study:

This is the story of Mark Wallace and how he turned up his extremely valuable house into a boutique hotel. Let’s have it from his point of view how he managed to gather the fund.

“Hey guys, this is Mark Wallace and I am going to share my story with you all today. I used to work as a dealer in a departmental store for about 11 years. My son, Adrian, was growing up and I desperately needed to gather up a fund for him so that he can have a good education. So, I tried to start a small business of my own. At first, the money which I was getting from the departmental store was not enough. Plus, I always wanted to have something of my own. So, I started to save a little money from my earnings and invested it in real estate stocks, without actually buying the property. I hardly had any luck there, but the money which I had invested was big enough so that I can start something of my own. I remembered that my granny left me a vintage house which is located on the outskirts of the city where I live. I sold all my stocks and with the fund, I went on to renovate the house. I had a minimum fund, so once my son went off to college, I and my wife shifted to my granny’s house and gave our current house for rent. In this way, I was gathering up more money to renovate the interior and make some minute changes in the construction. Soon, my boutique hotel was made out of my granny’s old home. Now I am a proud hotel owner and not only that. My son, taking up a job at a famous event industry is also preparing himself to look after the legacy.”

So, this is how we know that we can still go up for our small business ideas, even without the help of a bank. Although it is a long-term process, you need to keep your cool and stay patient throughout the process.

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Mashum Mollah is a tech entrepreneur by profession and passionate blogger by heart. He is on a mission to help small businesses grow online. He shares his journey, insights and experiences in this blog. If you are an entrepreneur, digital marketing professional, or simply an info-holic, then this blog is for you. Follow him on Instagram, Twitter & LinkedIn

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