Secrets for Funding Your New Business Idea

Small and independent business owners all over the country have a serious problem. They need loans, but they can’t get them from the banks. At the same time, the federal government is flooding the airwaves with promotions for easy money programs and bragging about how much capital is available. Clearly, there’s a disconnect, and it’s one that you can overcome by seeking out non-traditional funding for small business projects.

Traditional funding is loaded with strings and fine print. After you slave over the loan application, regulatory issues seem to crop up at every turn. The banks may have money from the federal government to lend, but they are not interested in lending it to you. Instead, you’ll find more luck – and more funds – through the kindness of virtual strangers.

The Case For Crowdfunding

Crowdfunding is a concept made possible by the Internet. Groups of like-minded individuals come together to support projects that align with their values, provide a service they like, or offer something interesting to the world. In many cases, the funds raised from crowdfunding ventures don’t have to be paid back, offering small and independent business owners up-front capital without a hefty after-market price tag.

Crowdfunding also doesn’t require a traditional business plan. While there is definitely value in developing a plan for your small business, not every business idea needs to be meticulously documented in the way that banks like. You know what you want to do, and you know how much you need to do it. If you can clearly express your concept to others, you already have the skills needed to be successful at getting crowdfunding. This can be a major timesaver in your quest for the capital to launch your business idea or take your existing business to the next stage.

How Crowdfunding Works

Crowdfunding works by putting your idea out in front of interested individuals, usually on websites devoted to funding new ideas. Two of the leading crowdfunding sites are www.peerbackers.com and www.IndieGoGo.com. Both sites are free to join and collect a percentage of funds raised to offset the costs of processing payments and hosting the project.

For each project you post up for funding, you will be responsible for creating a description page and reward items. The description page looks much like a blog post – a relevant photo at the top and then several paragraphs about your proposed project below. Rewards items are up to you based on funding levels. A $5 donation might warrant a thank-you postcard, while a $100 donation might earn a coupon for a free dinner at a restaurant, free yoga class at the school, or free dog grooming at your store. It is very flexible and up to each business owner to tailor their offerings.

What Projects Work Best for Crowdfunding

The projects that work best for crowdfunding are those with a specific aim. It’s not enough to get on the sites and say, “My business needs money.” That may be true, but it’s not a compelling or interesting story, and there’s no clear objective other than getting some cash. Better success rates are achieved with clearly defined goals.

For example, Dun-Well Doughnuts of New York is looking to establish a storefront presence for their existing vegan doughnut-making business. They are offering samples and coupons for the store when it opens. The Breathing Room, a yoga studio, is losing the use of its current location and needs $10,000 to remodel a new space. They are offering rewards of free classes and good karma. Minku, a newly launched handmade leather manufacturer, needs $3,000 to attend a professional fashion event they’ve been selected for in Barcelona, a trip not in their current budget. They’re offering leather merchandise and guest blogger spots on their web site.

As you can see, there are many different avenues to pursue. The uniting factor for these businesses is that they are too small or too different for traditional lending, and they have a specific need. With crowdfunding, it is possible to get the necessary funds without giving up ownership stakes in their business or dealing with banks.

Consider your own small or off the grid business. While the federal government makes empty lending promises, could you be using crowdfunding to get results and funds for your company?