When conventional funding options like bank loans and venture capital aren’t accessible or fall short, small businesses must explore innovative ways to keep their operations going. A little creativity and ingenuity can go a long way in helping you secure the funds you need.
That is why, 20 Forbes Finance Council members are here to share their top creative ideas for funding a business. From leveraging personal assets to garnering community support, these methods can provide the boost small businesses need for growth.
1. Private Debt Funds
Private debt funds are becoming more common sources for obtaining capital. Private funds will likely charge higher interest than banks because they are assuming greater risk in funding small to middle-market-sized companies. However, these funds may offer more flexibility and creativity in structuring these deals. – Ryan Loynd, BrightGuide Financial
2. Crowdfunding
Platforms like Kickstarter, GoFundMe and Patreon make it possible to raise funds from a multitude of supporters. These options are proving especially effective when you offer rewards in return for their participation, such as exclusive early access to products or unique experiences. – Jeorgia Brown, The Budgetnista
3. Use Idle Cash From Friends And Family
One way is to leverage the idle cash of family and friends in bank current accounts earning little or no interest. Selling your business ideas in a compelling way might attract their interest. You can easily afford to pay them returns above what they currently earn from the bank. Alternatively, the bank can lend you funds on the back of these idle current accounts as collateral. – Ayo Adepoju, Ecobank Transnational Incorporated
4. Look To Your Stakeholders
Secure funding from your key customers, early adopters and suppliers. If your customers perceive lots of value from your product or service offering, structure long-term contracts with upfront payment terms, like many software companies. If awarding a large vendor contract, the vendor may be amenable to structuring deferred payment terms to support your working capital strategy. – David Samuels, DrFirst, Inc.
5. Democratize Investment Opportunities
When the JOBS Act gave way for businesses to raise money through crowdfunding, this offered a creative way to raise capital. Despite initial setup and startup costs, these methods open doors for a broader investor base to participate in your company’s growth. Crowdfunding democratizes investment opportunities, making it accessible for individuals to support and benefit from innovative ventures. – Chris Seveney, 7e investments
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
6. Seek Advance Payments From Customers
Tap into a community you know already supports your business: your customers. Those loyal customers who highly value your services may be willing to pay in advance for a discount on current services or receive free value-added services in exchange for upfront payment—offering a mutually beneficial way to satisfy your capital needs. – Eyal Lifshitz, Bluevine
7. Run Limited-Time Promotions
There are various ways to fund your business outside of traditional norms. You can always presale your service or product with a special limited-time offer or discount. This can give you an estimate of demand and raise funds. You can also design a unique, fund-exclusive experience to help raise funds. – Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
8. Pitch To Backers
It depends on the type of business and the stage of business (seed/growth) if it is a tech startup. In recent times, crowdfunding sites such as Kickstarter, StartEngine and so on. have become popular. By pitching the business to potential backers and supporters, one can obtain funding while also validating the business concept. This method also creates excitement and interest in the product/service. – Hemanth Golla, High Circle
9. Leverage Revenue-Based Financing
One innovative funding method is revenue-based financing: investors provide funds in exchange for a share of future sales. You pay them back a portion of your revenue until you’ve returned the agreed-upon amount without giving away ownership of your company or dealing with high-interest loans. It’s a flexible option that ties the investor’s payoff to how well your business does. – Nick Chandi, Forwardly
10. Bootstrap With Personal Savings
One non-traditional way to raise funds is through bootstrapping. This means using personal finances like a 401(k), savings accounts, emergency cash and more. The idea here is to not pull any money out of the business until the business is successful. All profits will be reinvested back into the business. You will need to be as cost-effective and frugal as possible while avoiding taking on personal debt. – Jody Grunden, Summit Virtual CFO by Anders
11. Offer Limited-Edition Products
Sell limited-edition goods and services. They can generate customer excitement and urgency. It might be a custom product line, a service bundle or a behind-the-scenes company experience. This method boosts revenue, brand visibility and consumer engagement. The limited edition’s uniqueness and novelty can boost your business’s media and word-of-mouth, resulting in increased sales. – Neil Anders, Trusted Rate, Inc.
12. Host Experiences Or Industry Events
Plan a number of seminars or themed events that are relevant to your industry. Charge attendees for admission and provide them with special benefits or experiences. Use the money raised from the events to finance the expansion of your company. – Gomathy Periathiruvadi, Alita Systems
13. Attract Social Impact Investors
Appealing to investors who are interested in generating social or environmental impact alongside financial returns can open new funding avenues. Social impact investing focuses on businesses that address societal challenges such as sustainability, healthcare and education. This approach aligns profit with purpose, attracting a growing segment of socially conscious investors. – Jeffrey Bartel, Hamptons Group, LLC
14. Engage Directly With Your Key Strategic Customers
Often, smaller businesses provide a mission-critical service to larger customers, and in turn, those larger customers could provide short-term funding to assist those smaller organizations as they go through different phases of growth. Tap into your existing networks, even if the terms and duration are more flexible in nature. – Omar Choucair, Trintech
15. Take A Merchant Cash Advance (MCA)
One revenue-based financing option, known as a merchant cash advance (MCA), is among the most accessible alternative lending solutions for owners who need to quickly improve cash flow. MCAs are not loans. Rather, a business acquires the entire amount of payment in exchange for a portion of its future sales. Repayment terms fluctuate based on sales: businesses never see more money going out than coming in. – Lawrence Pross, Nexi
16. Turn Customers Into Ambassadors
Give your first customer a great deal and recruit them to help grow your business. Structure the contract to make it financially advantageous for them to support your idea and grow the business. Adopt a referral bonus for them to get you other paying customers for your business, which will help your cash flow. – Dave Sackett, Persimmon Technologies Corporation
17. Utilize Self-Directed IRAs
Since our core business is self-directed IRAs, I would say that is a good strategy to consider when looking to raise money for your business. Using someone’s retirement funds could be structured as a loan, as equity or even a convertible loan that can be converted to shares/equity later. – Jaime Raskulinecz, Next Generation Trust Company
18. Tap Into Your Personal Credit
To fund your startup, I’d go with leveraging your personal credit to obtain financing. There are credit cards that offer signup bonuses and 0% APR over 12 to 24 months. For any business owner, that’s hard to beat. – Yaakov Goder, Capital Express
19. Ask Those Around You For Help
I have always advised small business owners or startups that family and friends should be their first port of call when seeking funding for their businesses. Due to your relationships, it is easier to reach and convince them about your idea than total strangers. – Richard Okon, St Nicholas Hospital, CEO AcquireEdge Partners LLC
20. Use A Subscription Model
By offering customized products or services on a subscription basis, you can generate recurring revenue from loyal customers. This model not only ensures a steady cash flow but also allows you to showcase new products and foster a deeper connection with your customer base. – Ash Shetty, CFA, PineBridge Investments
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
