Small businesses can leverage various funding options or Other People’s Money (OPM), each with unique benefits and considerations.
Here are some ways to use OPM as a business effectively:
Self-Funding (Bootstrapping)
This involves using personal savings or investments from family and friends. While this allows you to retain complete control, it also means taking on all the financial risk. It’s essential to carefully manage your resources to avoid jeopardizing personal finances, especially retirement accounts.
Small Business Loans
The U.S. Small Business Administration (SBA) offers loan guarantees, encouraging banks to lend to small businesses that might not qualify for traditional loans. SBA-backed loans can provide essential capital for startups and existing businesses without requiring you to give up ownership.
Crowdfunding
Platforms like Kickstarter allow businesses to raise funds from a broad audience in exchange for perks, such as early access to products. Crowdfunding is low-risk since you retain full control of the company and are usually not obligated to repay contributors if the project doesn’t succeed.
Venture Capital
For high-growth companies, venture capitalists can offer funding in exchange for equity and a more active role in decision-making. However, this path typically requires giving up some control over the business.
Alternative Lenders
Small lenders and microloans are other viable options, especially for businesses that may not meet the requirements for large bank loans. They can offer more flexible terms but might have higher interest rates .
These funding options offer diverse solutions depending on your business goals and financial situation.
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