Saturday, February 7, 2015

Alternative Funding Sources for Your Business Startup

Depending on the nature of your enterprise, there are numerous sources of alternative funding available to help get your enterprise off the ground.  I have focused on two in this post: Micro Enterprise Works, and the U.S. Economic Development Administration, because they can be utilized by for-profit organizations.

However, if your startup aspires to help boost a community's economic development, renovate a neighborhood, or serve the Native American population, there is a plethora of other alternative financing sources available.

So, what is “alternative funding?” Essentially, it is not relying on a bank loan to start your enterprise. Banks are the most often thought of sources of funds by entrepreneurs, but are the least likely benefactors of startups. Banks loan money to established enterprises with a history of positive cash flows and income. They simply want to know that you can pay back the principal and interest on a loan without fail.

Alternative funding sources are those that are willing to invest in your company’s idea. They come in a variety of forms, and Martin Zwilling points out a number of them. Most involve your own personal investments, those of friends and family, or those generous Internet people that are willing to toss a buck or two your way, because they relate to your idea and expect virtually nothing in return except a “thank you.” These sources of funds are particularly difficult to come by in the saturated entertainment business market.

If you cannot afford to fund your entertainment business company through personal resources, do not give up on your idea. Organizations like Micro Enterprise Works and the U.S. Economic Development Administration are still available to help. Both organizations, however, will require a formal business plan, and the willingness to divulge certain personal information.

The bottom line: loans are difficult to come by for startup companies. If you cannot afford the company yourself, be prepared to “give away” some equity ownership (and thus control of) your idea. Remember, however, that competitors are right on your tail, and partial ownership of your idea is better then none at all.

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