Funding Tips for SMBs

Tips for Funding Medium-Sized Businesses in Today’s Environment

When running a business, one of the biggest problems many have right now, is obtaining funding. In the past, money has been much easier to borrow, but with current economic conditions, easy funding is gone. Businesses borrow money for any number of reasons including to hire employees or open up new locations. In reality, a lot of businesses of any size falter because of the lack of adequate funding. Here, are 5 tips for obtaining funding for medium-sized businesses in today’s environment.

Venture Capital
When running a medium sized business, one needs to determine how much they are willing to give up in regards to control. Venture capital money is usually obtained for higher risk, higher reward companies. This is an excellent way to get a serious amount of money to take a business to the next level. The downside with venture capital is; they end up owning a portion of the business. Oftentimes, they even want to control aspects of the day to day operations. Venture capital money can be used to start up a company, or to expand operations or ideas.

Traditional Banks
By the time a business is medium-sized, they will no doubt, have a banking relationship. Even though, receiving funding is difficult, an established business can still get money. Banks are exceedingly strict when giving out loans, so be prepared to have financial statements on hand. A business that over the long term has made money will have no problem qualifying for a loan. Establishing a banking relationship with a local bank is a terrific idea for a business owner.

SBA-Guaranteed Loan

Image representing U.S. Small Business Adminis...

Image via CrunchBase

If a bank will not loan money, there are other options. One is through the SBA guaranteed loan program. There are SBA district offices all over the country where one can fill out a loan application. The people at the SBA will be able to assist one in filling out the application. Many medium sized businesses can get more consideration if they are hiring new workers or in a certain industry. The small business association can help one qualify for the maximum amount of money.

Angel Investor
If a business is viable and profitable, an angel investor may be able to assist. Like borrowing from a bank, one needs a solid plan for what they plan to do with the money. One would need to have financial statements and proof of profits to have a serious chance of receiving funding. Angel investors are different from venture capitalists in that an angel investor does not seek to run the operations of a company.

Sell Stock
A company that is seeking funding, can also sell a portion of their company. This is a way to gain funding, while still controlling the company. This is a way a business can get a large amount of money, to really fund operations needed for growth. Stock can even be sold to employees who are confident in the companies operations.

Anyone looking to obtain funding for their business needs to be prepared. Financial statements and a serious business plan are needed. This is because anyone giving out a loan wants to be sure they are dealing with a legitimate business. When obtaining funding, a business has an excellent opportunity to take expand exponentially.

Skylar Rickman writes about business, finance & more at www.creditreport.org.

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