Closing Resource Gaps
Playing to your strengths is critically important as an online small business operator. Just because you’ve got an idea to start your online business, doesn’t mean you need to be able to do it all yourself. Understanding how to tap into cost effective and efficient resources is as important as launching your new online business.
In addition, if you need funding, there are funding sources other than the traditional funding sources (bank loans, line of credit etc.) available to choose from. Modern funding sources involve community sources and accessing large scale small investors. Whatever the funding source, it is important that you select the one that fits your risk profile and business idea.
Traditional funding sources
Some popular traditional funding sources include:
Banks and financial institutions
Using your personal credit card, applying for a business loan, securing an overdraft, or using personal assets to guarantor loans are common traditional funding options.
The challenge with these options is that they often combine your personal wealth with the wealth of the business. This is usually because banks and other financial lenders like to see a financial track record - which is difficult to provide to the bank/lender as a new business that is yet to commence trading.
These companies offer startups an opportunity to be backed by angel investors (people who provide startup funding), government, or other types of investors. They are sometimes called accelerators, because they jump-start a business that may have been trading for a while. Incubators are unique to each country. In Australia there is Business Innovation and Incubation Australia (BIIA) and the Australian Government provides an Incubator Support Programme. Globally, the International Business Innovation Association and the National Business Incubator Association (NBIA) are bodies with around 2,000 members across 60 countries, respectively.
Venture capital providers mostly seek out mature companies with high revenue generating capabilities, however they also look at younger companies that are in high tech categories.
Your bank, trade associations or your small business network are usually good sources to help you identify where these types and other types of investors can be found.
Modern funding approaches
It is often difficult for startup businesses to obtain funding from traditional funding sources as many traditional institutions consider them too high a risk. And so, being an entrepreneur means you may have to be creative about where you access your capital. Crowdfunding is one of the most popular modern funding sources.
Raising capital via online social media networks that enable a large number of people to contribute to a project. The key is to understand what you will offer in exchange for the funds the individuals provide to your project. They will want to see some type of return. There are many crowdfunding sites, but if you’re not familiar with crowdfunding, take a look at:
There are many more crowdfunding sources on the internet!
Whatever your funding method, be clear as to what the investor will get in return and whether you are asking for a loan or offering equity. Do careful research as to what is available in your country and spend time researching the best fit for your business aspirations and management style.
© RMIT University 2017