Starting a small business begins with an idea. However, even the best and most innovative ideas cannot become thriving small businesses without capital. Even if money isn’t the overriding factor why you begin a business, it is essential to its existence and sustenance. Unless a small business owner is independently wealthy and has unlimited funds to filter into a company, someone starting a small business must find creative and effective ways to invest in it for it to be successful. It can sometimes be difficult to find good ways to raise money to sustain a business. Consider one or more of these six smart ways to invest in your small business suggested by Open Forum.
1. Business Cash Advances
Business cash advances are simply amounts of money that are loaned to businesses as advances against future credit card sales receipts. In the past, this method of getting money to sustain a business has been an expensive option for small business owners. However, that is no longer the case. Today, these loans are more affordable with attractive terms that are favorable to borrowers. These advances work by having money advanced to the business that is later repaid through future sales. The business owner is also charged a small fee for the initial transaction.
Crowdfunding is a trendy way to raise money for a small business that is still growing in popularity. For those who are not familiar with crowdfunding, it is a broad term that defines many different types of funding from different sources of individual investors. Some of the more popular options for crowdfunding include sites such as Kickstarter and Indiegogo. The idea behind crowdfunding is getting ordinary, everyday citizens to fund startup projects. This option is perfect for business owners who are looking for some additional funds to start or expand their businesses. Business owners should offer an incentive for their crowdsource investors such as advanced receipt of a new product.
Microloans are a specific category of small loans that are usually under $50,000. These loans are traditionally easier and faster to get than traditional small loans. There are specific groups that specialize in providing this type of loan to small businesses. Often, they are earmarked for specific types of small businesses such as day care centers or food and beverage businesses. The Small Business Administration (SBA) has a program that connects small business owners with microlenders. Small businesses that are interested in obtaining a microloan should contact their local SBA office to obtain the appropriate information and to be connected to the best microlender that fits their needs.
4. Credit From Vendors
Another great way for a business owner to obtain money for their business is to obtain credit from their vendors. Vendors have a vested interest in the success of a small business. If the business fails, it is one less place for their wares to be sold. Therefore, vendors are often willing to invest money into a small business to further their own success. Vendors will often offer programs that allow business owners to pay only for inventory that is sold to a customer. Vendors may also sometimes lower or eliminate their carrying costs, which can also allow a small business owner to keep that money in the business and have lower operating costs.
5. Sales and Annual Discounts
One of the easiest ways to invest in a small business is through the customers who spend their money on it. Sales and annual discounts have been effective means of generating income for a business since the origin of the business itself. Customers have historically jumped at any possible chance to save money, and common sense dictates they will continue to do so. Having sales and discounting merchandise gets people into stores to spend money, which ultimately raises funds for the business. This tactic can also be applied to businesses that don’t sell retail merchandise as well. Offering discounts for annual payments on memberships is another great way to generate income for a business that can then be reinvested into the company.
6. ROBS Programs on a 401K
Rollovers as Business Startups (ROBS) programs are a way for business owners to use the tax-deferred retirement funds to start or fund a new business or franchise. A major benefit of using a ROBS program is that there is no penalty for early withdrawal of the funds. Before someone decides to take this route, it should be carefully examined, as there are some downsides to it. The rules for using money via a ROBS program are complex, and if they are not followed precisely, a business owner can end up owning a large amount of money to the government in back taxes and penalties.
The success of a small business lies largely in the ability of a business owner to invest funds into it. Thankfully, there are many ways a small business owner can invest in the business to make sure it thrives for many years. Small business owners who have questions regarding investing in marketing and web content for their business or need help figuring out where to start should contact WPAmplify. We specialize in helping small businesses thrive.