Have you heard (regardless of what ads say) that the U.S. Government does not give out grants to individuals to start a for-profit business? It’s true - but that does not mean that you can’t get any help from the government.
If you talk to business-minded people who have been around for a while you may find they’re pretty jealous. Why? Because it's easier than ever to get a new business up and running. You can probably do it without leaving your home. The internet, free services available online, research at your fingertips, and the ability to apply for and obtain a business license in seconds all combine to make it easier than ever to become your own boss.
Of course being successful and making a living at it are another matter. Many new businesses fail. More often than not the reason is that they run out of cash. They didn’t have enough money at the outset or they don’t have a handle on their business model.
Find out how to be sure you get the money you need to get going. And don’t worry, you probably won’t need to ask a bank for the money….
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If you’ve checked out our article about Business Grants you should know that sometimes you can find what you’re looking for close to home. And local resources can have the benefit of meaning less competition from other companies. This applies to many programs and services, including grants. And if you take advantage of local services you might be able to learn about local grants you didn’t know existed. One great example of a local resource tied into what’s going on regarding business near you is the SBA’s SCORE organization. These are retired executives who share their experience and expertise to help you be successful - and their help is free! Search for a local group and see what you discover. As one expample, the Silicon Valley SCORE group is putting on a “Business Boot Camp” for people who already own a business as well as for those wanting to start one.
We’ll cover a bunch of resources for getting your startup cash, several of which you may not know about. One of the most intriguing - and appealing - approaches was outlined in a recent Wall Street Journal article. It involves getting your customers to provide the cash you need. You’ll need some serious salesmanship skills to do this but hey, you’re going to need those anyway.
Cash from Your Customers: How can you get your customers to hand over cash before you have to spend much money? One way is to offer a subscription service or what some online training courses call a “membership” service. This way the customer pays up front - not unlike a magazine subscription: pay now and you’ll receive something in the future. Ideally that “future” is far enough away that you’ll be able to get your cash before you have to pay your vendors or contractors. Banana Republic actually started this way — back in the day when they could charge a dollar for their mail-order catalog (!) and arrange not to pay their suppliers for a month. Or when you do your big introductory product promotion you might make it a very limited time offer and get people to pay you before you have to pay your vendors. Or you might require a deposit or partial payment up front, before delivery of your product. This is fairly typical for big ticket items or projects. We’re not saying it’s easy but it’s something to add to your brainstorming…
Changing Trends: According to the Wall Street Journal technology is not the only thing that is changing for start-ups. There is also a shift in the way entrepreneurs are funding their start-ups. Fading into the past are the days when the most likely money sources were bank loans and home equity. Now new businesses are relying more on savings and credit cards (one example cited an entrepreneur who opened 18 credit cards to get his busines going!). Much of this change has resulted from the real-estate bust around 2008 — and the tiger lending requirements that followed it. The most likely amount needed to get a business going is still about $50,000, similar to the past. However there are more and more entrepreneurs who are able to use technology to do more for less, and they have gotten by with under $10,000 in start-up capital.
Government Help for New Business: The government won’t directly fund your new business but it can definitely help. The Small Business Administration (SBA) is an important resource for information, training, and support finding funding. In your quest for cash you may be tempted to jump over things like “training and support.” But be aware of the fact that sometimes training and advice can be more valuable than cash. It might be the case that you don’t have a good handle on your business model and what is actually causing issues that require more cash. If that’s the case then an injection of money might just further mask your problem. An organization like the SBA is designed to provide excellent counseling you should take advantage of.
In our article Fund a Startup Business you will find more specific information about SBA 7(a) loans and about the Small Business Loan Fund (SBLF) — including how to find a very handy map that lets you see the participating lenders in your state. Super easy to use, it will save you time finding out where you might have the easiest time getting a loan. That same article also provides some great information about taking advantage of state government programs and sometimes grants for new businesses.
Intimidated by VC’s (Venture Capitalists)?: That’s totally understandable. VC’s deal with big numbers and they expect a very polished pitch. They also have some great connections. But they will expect a big chunk of your business in return for funding and other support. If you’d rather look elsewhere think about finding some local “Angel Investors.” These are folks who have already made a lot of money and they want to invest in interesting new ventures — for fun and profit. They’re willing to invest smaller amounts than VC’s and don’t necessarily want part ownership of your company. Best of all, there’s now an easy way to find them - and for them to let you know that they’re interested. Get the details in Fund a Startup Business.
Do these options sound a little beyond your capability to pursue? If so you might want to check out Microfinancing. This type of funding has been used in other countries for a quite a while to help people start very small businesses that help lift them out of poverty. Now there are microfinancing options in the U.S. They can be ideal for those with a low income, no bank relationship, and little or no business training. What you do need is a good idea, a reasonable feel for your market, and the determination to do what it takes to get a business going.
Then there’s always crowdfunding, a big crowdpleaser with many these days. Of course you always hear the stories about a person or company or school hitting it big and going way over their goal with a crowdfunding campaign. But only a very small percentage really go sky high. Some are successful and hit their goal; others fade into obscurity. It’s intriguing though and a great way not only to potentially raise some money but also to get exposure, test your concept and maybe even get some early customers interested. Experts on the subject share some similar advice about running a successful campaign:
- For starters you need to be able to tell an engaging story. Use any background info that is interesting and let people know details about what your product or service is. Also share why you chose it — and why you are uniquely qualified to pull it off.
- Let readers know some details about your plans and your budget.
- Use the handbooks and advice provided by platforms like Kickstarter. They know what they’re doing and they want your to succeed.
- Be clever about what you’re offering in return for donations and be reasonable about your goal.
- Keep up good relations by updating donors regularly about your progress.
Need More Business Education? If you would like to own your own business but you really feel you need more education, you may want to get some schooling specific to business and to your field of interest. If you search “grants for business” you’ll very likely see ads for some schools such as Full Sail University. This is a private, “for-profit” school and there is nothing inherently wrong with that. But there has been controversy lately about “degree mills” and schools that don’t really meet high standards or qualify their students for good jobs. And a high percentage of the students at these schools receive grants (like 88% at Full Sail), most likely from the government. If you’re considering such a school be sure to read lots of reviews rather than just one or two. As one reviewer said,if you’re interested in STEM you will probably get lots of job offers. If you’re going for film or music, that may be a lot harder —- regardless of where you go to school.
Programs for Women and Minorities
The current climate for women and minorities to start businesses is excellent. Thanks in part to the SBA we are seeing great success stories in these areas. In addition to opportunities the SBA promotes, significant developments are occurring elsewhere. See our articles on Grants for Women and Small Business Grants for Women if you are a woman with a great idea or an existing company. Women and all minorities should check out the Minority Business Development Agency for resources, support and inspiration. The National Minority Supplier Development Council (NMSDC) is also an option for support. They have more than 12,000 members certified as minority businesses and they work with major corporations (i.e. big buyers!) to help meet those companies' needs for supplier diversity. Membership can definitely be helpful for small companies to reduce their operating costs and find big customers more quickly!
How About the Shark Tank
Ever watched “Shark Tank” on TV? A panel of self-made billionaires listens to, judges, and competes to invest in pitches from entrepreneurs. It’s a very entertaining show — and it has helped a lot of businesses go from small to large - and rich! It’s also educational because you get to see what a potential investor is going to want to know about you and your business. If you are even considering applying to get on the show and pitch your business, be sure you know the answers to their most common questions:
- what is your background (experience, education)?
- what makes your product unique? Who are your competitors?
- what is the cost of your product?
- what do you sell it for wholesale? retail?
- how can you reduce your costs?
- what is your distribution channel?
- how many stores are you in? how did you get in?
- how much money have you put into the business yourself?
- are you dedicated to the business full time?
Above all, be passionate about your business and decisive in your answers! To apply to be on the show and make your pitch just go to the ABC website. You can send them an email or go to an open call; locations and dates are listed online.