I’ve been lucky. For most of my entrepreneurial career, I’ve been able to bootstrap my companies until I could raise the outside capital I needed to grow—it’s a luxury most small businesses don't often get to enjoy.
But that doesn’t mean capital is completely unavailable to small businesses. I find that the trick is to seek out sources that best fit your business type. Here are three you might want to consider:
1. Loans from the Small Business Administration (SBA).
This type of financing is guaranteed by the federal government—specifically by the Small Business Administration. These loans are provided by traditional lenders like banks and have some minimum requirements, including work experience (three years is the typical minimum), a solid credit score and proof that you've invested at least 30 percent of your personal equity in your business.
The lending amounts for SBA loans can range from $100,000 into the millions, with a host of different loan types offered to meet the needs of different borrowers. If you’re in need of a significant capital infusion, this critical source of funds might help.
This might be the most buzz-worthy source of financing around. Made famous by Web sites like Kickstarter, crowdfunding lets members of the general public donate to an entrepreneurial venture. In return for the public’s monetary support, entrepreneurs often promise donors “rewards” during or after the creation of the venture.
3. Rollover for Business Startups (ROBS).
ROBS lets entrepreneurs use their retirement funds to start a new business. The unique upside of this funding option is that individuals don't experience the usual tax hits associated with accessing retirement funds early. It can be a great way to get your business off the ground without going into debt, as long as you're working with established firms that are familiar with this type of financing and its tax compliance needs.
After investigating your options, it could be that one or several of these solutions may help you gather the funding you need to get your business to the next level. Just be sure to fully assess your short- and long-term financing needs, as well as the risks you're willing to take, before making any financing decisions.
Read more articles on managing money.
This article was originally published on January 5, 2015.