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5 Killer Methods for Financing Your Online Business

Personal_Finance / SME Nov 05, 2015 - 05:28 PM GMT

By: Boris_Dzhingarov

Personal_Finance

You’ve reached the tipping point. A product idea has transformed from prototype to sellable item, and you’ve sat down with a business partner to discuss your strategy for marketing, selling and producing the products in order to start making money.

The big question is: How are you going to get the startup capital to purchase that first batch? How about paying for the eCommerce website or at least founding your payment gateway?


All of this ties into that initial funding, yet most small, or not quite existent, online businesses don’t have the clout to walk in front of the bigtime angel investors and land a funding round that is going to put them on easy street.

Not that millions of dollars is going to make your company anymore successful. If you’ve watched even one episode of Shark Tank you know that the sharks often refer to a large initial funding round as a curse of riches.

So, there’s a decent chance you’re actually in a good situation, not having all the money in the world to get your business started.

However, every onliwne business requires some sort of funding, so it’s essential to understand the ideal ways to go about finding it. Similar to asking your boss to give you a pay raise, convincing other people to give you money for a business is a delicate task. Therefore, keep reading to learn about the best methods for financing your online business and why they can work for your company.

Note: Angel investors, venture capitalists and small business bank loans are a few of the more talked about (or obvious) financing options, so we’ll avoid those for now. It’s also worth noting that these three tactics are rather difficult for many small businesses.

Turning to Family and Friends Who Are Willing to Take a Stake

Ah yes. The old faithful. Turning to a friend or relative and asking them for money.

This could turn into a terrible situation, but if one of your friends has been talking about starting her own business or investing in something to expand her wealth, it’s not going to hurt anyone to create a business plan and pitch them on your idea. You may very well have a business partner for life.

The same goes for family members, but only bother them if you’re certain they have disposable income and you have a rock solid relationship with them. Some of the best familial investors are the ones that are willing to shell out some cash and step away from the business completely. That way, you don’t butt heads and you can try to return the money as quickly as possible.

On the other hand, it’s essential to remember that money can ruin seemingly rock solid relationships. Avoid those friends and family who may hound you for the money or completely hinder the way you run your business.

Other than that, it’s probably the easiest source for cash you can find.

Crowdfunding Like the Best of Them

Some of the top crowdfunding options include sites like Kickstarter and Indiegogo, each of which provide the tools for entrepreneurs, artists and small businesses to post information about their projects and ask complete strangers online for contributions.

These contributors aren’t simply giving you a donation, but you generally provide them with completed products once you’ve gained full funding. You may also ask for additional money for those who want upgrades, VIP offerings or fun additions to their products.

Crowdfunding can yield some wonderful results, yet it generally takes a stunning product idea, along with videos, images, constant communication and a promise to deliver the completed products in time.

The coolest part of a crowdfunding campaign is that if you yield no results, no one gets penalized. The backers who tried to help you reach your goal get their money back, and you can start from scratch to see how you can gain more traction in the future.

Tap Into the Online Lending Trend

Sites like LendingTree, Lending Club and Prosper have made small business financing easier than ever. The systems work where you apply for a small business loan, and instead of reaching out to a bank or asking individual investors for money, regular people contribute money to your cause.

It’s somewhat similar to crowdfunding, yet they run like markets where you pay interest for a portfolio of microloans, and the people giving you money expect to see a return on their own investment portfolios.

However, a study showed that around 60% of the small business owners on LendingTree failed to compare lenders. If you’re trying to run a serious business, complete the needed research to figure out who is lending you money and if you’re getting the best rates. 

Accept Presales for Your Products

The presale is often forgotten as a way to finance your small business. It’s not always practical, but if you can pull it off, the rewards are much stronger than going for a loan.

Why is this the case?

People already signed up for your , are already expressing interest in your products, and they pay you the money upfront, giving your company some cash flow and boosting chances for marketing to new customers.

All you need is a nicely designed website, and you have no excuse for not having one, with so much affordable shopping cart software> out there, and a video to explain what your product is all about. Create an eCommerce shop to accept payments, and keep a constant line of communication for those who have sent in money.

Note: Celery is a solid tool for presales.

Carefully Considering a Business Credit Card

Another quick way to start paying for items is to take out a standard small business credit card. The upside to this strategy is that you can start paying for your products without having much upfront capital at all. Even if something goes wrong you can simply pay the minimum until you start bringing in more sales.

On the downside, accumulating interest on credit cards is a dangerous practice, so it’s wise to make your payments on time and not treat the credit card like an infinite supply of money.

Over to You…

Now that you’ve had a chance to check out some of the more 21st century ways of finding a small business loan for your online company, share your thoughts in the comments section if you’re just getting started financing your business.

By Boris Dzhingarov

© 2015 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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