Uncommon Places to Look for Startup Funding
Have a small business but don't want to go the traditional investment/loan route through a bank or venture capital firm? You might want to try these uncommon sources of funding first:
It might sound counter-intuitive, but the best place to look for startup funding might be inside of a large corporation. According to Robert Ackerman, founder and managing director of Allegis Capital, a partnership is beneficial to the corporation, because large companies can have a tendency to stall on innovation — while smaller startups simply don't yet have established brand identity/customer service pull to “get out there.” Write a strong letter and send proposals to the company of choice's marketing department (the company of choice should be one in your industry) and reap the benefits of partnership.
Friends and Family
It's probably the riskiest route, but it's certainly unorthodox: hitting up friends and family for funds. | Don't hit friends and family up too early, before a formal business plan is in place. Says Inc magazine: “No matter how excited you are about your idea, you need to be as rigorous as you would be if you were wooing the most jaded banker. That means supplying formal financial projections, as well as an evidence-based assessment of when your loved ones will see their money again.” Your parents, extended family, siblings, etc. will appreciate your meticulous and careful handling of their money — just because they're related to you doesn't mean you should treat them less seriously. Also: remember that, as investors, your lending family members still have a stake in your future business's finances.
Grants (for Nonprofit Startups)
If your start-up is a nonprofit, you may be able to seek grants from the government — both state and national. Not sure if you qualify? Check out the IRS website for a more detailed explanation of non-exempt status.The government's grant site, www.grants.gov, allows you to apply for grants in bulk, once you register (the process takes 3-5 days, or longer if you make a misstep.) You can download a grant application in advance, and complete it when you're ready. You'll receive instructions on submitting it, and get sent a tracking application. In addition, the Grantmanship Center's interactive map also lists local sources of funding by state (from community centers as well as the government.)
Small Business Administration Grants
The Small Business Administration got a boost last year with the American Recovery and Reinvestment Act — the association received $730 million for new loan programs, expanding its microlending program, and new technology systems, among other expenses. SBA loans are typically more flexible than other kinds of loans, and require a proposal, a cover letter, letters of intent, contracts, licenses, and partnership agreements. Make sure to explain industry-specific terms in your proposal, and explain your business background, the purpose of your loan, terms of repayment, etc. While the SBA isn't a direct lender, it's a helpful intermediary — it sets the guidelines for your loan process, and the money is then given out by its partner financial institutions.
Business Plan Contests
The University of Texas at Austin, as well as the University of Georgia at Athens, are the big players in college b-plan competitions. (Another big competitor: MIT's $50 K Entrepreneurship Competition, though there are many others out there!) The best part? You don't even necessarily need to be a student to enter — some contests require that only one member of your team be a full-time enrolled student while the other contributors need just be business-savvy. Most business plan contests run from fall to early summer — but you can start building a team any time of the year. The payoff, even if you don't win, is constructive feedback and criticism from powerful investors regarding your business plan.
About the Author: Vince Conklin is a freelance writer who specializes in writing about business loans. Vince has helped many business owners find the perfect business loan to help their business reach the next level.