Welcome to the end of the year. It’s a time for celebration and reflection, a time to determine what went right and what could have gone better, and a time to make bold decisions to do something different.
When we ring in the new year, a number of individuals will decide that 2012 is the time when they will become an entrepreneur. Will you be part of this group? If so, you will want to establish operating capital to keep yourself in business for years to come. Most new entrepreneurs do not have a great deal of money to start out with, but there are a variety of ways you can generate funding for your venture. This month, we will review five options – microlending, peer-to-peer lending, accounts receivable factoring, community banks and angel investors.
Week 1: Microlending
As early as ten years ago, when business owners needed money to begin or expand their company, they filled out a quick application at their bank, sat down with the business development manager and received the funding in a couple of weeks. After the recession in 2008, some business owners no longer are “good risks” according to the criteria of the larger banks and lending institutions.
The answer to this shift in lending is called microlending (or microfinancing). Microloans traditionally go to those who are overlooked by traditional lenders: individuals with poor credit, individuals without substantial collateral and entrepreneurs who are breaking into an emerging field.
In the U.S., the microloan became a vital tool during the economic crisis that began in 2008. Under the banner of the Small Business Administration (SBA), the U.S. government stepped up funding of its microloan program to $50 million in 2009, an increase of $30 million over 2008, according to the U.S. Small Business Administration (SBA) website. These loans proved to be crucial aids for American small business owners in keeping their enterprises running during the recession.
Where can you apply for microloans? What are the criteria for receiving one? Visit the U.S. Small Business Administration website and select the Microloan Program tab – http://www.sba.gov/content/microloan-program. If your business were headquartered in the Chicagoland area, ACCION Chicago would be your best source for microloans.
Have you ever had to achieve a goal in a non-traditional manner? Did you appreciate the success more when you went about it by choosing Plan B versus Plan A?