Go Against the Crowd: Friends & Family Funding Advice from TrustLeaf

Go Against the Crowd: Friends & Family Funding Advice from TrustLeaf

Photo credit: Silicon Valley Business Journal

Everyone has been talking about crowdfunding lately, but what about momfunding? Or friendfunding? Earlier this week, family loans site TrustLeaf released their first guide on “How to Borrow Money from Friends and Family.” For any small business owner who’s done this kind of loan before, the value of doing it right cannot be understated.

Unlike crowdfunding, where entrepreneurs ask for donations from strangers (sometimes with a gift in return) TrustLeaf helps small business owners raise money through their existing social and family network. “Crowdfunding is great if you have a sleek prototype or a chic new fashion line, but doesn’t make as much sense for say, an auto repair shop.” says Anson Liang, TrustLeaf’s founder.

38% of all US small businesses start out with friends and family loans; on average, borrowing $25,000. Compare that with popular crowdfunding site Indiegogo, which only brings in about $1,000 on average per campaign. Kickstarter performs better, but the vast majority of campaigns raise less than $10,000, which in turn is less than half of friends and family loans on average.

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5 Things to Know About Financing Your First Startup

5 Things to Know About Financing Your First StartupBy David Nilssen, Co-founder & CEO, Guidant Financial

If your goal for 2014 is to become a business owner, you’re most likely being inundated with advice and tips. Maybe so much that sifting through it and evaluating who you can trust is eating up time that would be better spent putting the wheels in motion for your new venture. In the interest of saving you time and aggravation, I’ve broken down the five most important things you should know about getting the funds squared away for your business:

1) Pre-empt your lender’s doubts.
If you’re seeking a loan to purchase a franchise, your bank may be well-versed in franchising—or not. Assume they will need convincing about the franchise and do their homework for them: a risk evaluation using banking terminology and analyzing standard underwriting topics. A FRANdata bank credit report in hand will smooth your path with lenders.

2) Get your financial records in shape.
That means get them together in one place in a condition that makes it clear that you are trustworthy, keep meticulous records and are a serious professional. The bank is going to want to see:

  • Personal and business credit history
  • Personal and business financial statements for existing and startup businesses and as well as a projected financial statements
  • A strong, detailed business plan (including personal information such as bios, education, etc.)
  • Cash flow projections for at least a year

3) Realize that your payment history is important.
There’s no question that your credit score is important, but banks will also look at your back payment history. If it concerns them, it could dilute the weight given even a strong credit score.

4) Make sure your resume reflects your business acumen.

Even if you’ve never owned a business before, highlight the experience you do have to show lenders that you have knowledge of the space you’re entering, that you finish what you start, that you have membership in organizations that are relevant to your new business.

5) Keep calm and carry on.

It’s become an internet meme, but it’s relevant here. Be patient and move forward with plans as best you can while awaiting a decision from the lender. If you get a ‘no,’ move on. Successful business owners know that it’s all about the long game.

Of course there are alternative ways to fund a business. If you’ve got a 401(k), there is a rather complex, but completely legal way to use the retirement account to purchase a business—without incurring any debt.

David Nilssen is the CEO & Co-Founder of Guidant Financial. Read more tips about becoming a successful entrepreneur in his book, Making the Jump into Small Business Ownership. He can be found on Twitter at @DavidNilssen.

4 Alternative Sources of Funding Your Small Business

The increasing bankruptcies or dissolution among small businesses has mirrored the decreasing confidence of small entrepreneurs have had in the already sluggish economy. Since the start of recession, securing funding for a small business is more difficult than ever. One example is getting credit to start a business venture. Since lenders and investors know the fact that small businesses are more prone to risks, they are getting wiser and stricter on who will be eligible to lend credit. This leads small business owners to pursue alternative funding options and other sources of funding that are often overlooked but might prove to be the start of smooth sailings for a business.

  • Home Equity Loans

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How to Finance Your Business in an Emergency

While big business may have access to bank lines of credit and even government bailouts, small businesses usually don’t have the same financing resources. When an emergency strikes and you need cash, you need to understand how to finance your business through a rough period.

Emergencies may include major equipment failures, serious cash flow shortages due to customer defaults, unexpected lawsuits, tax liabilities, or a myriad of other situations. Regardless of the cause, you need to find cash fast to rectify any situation that threatens the stability of your business. Following are some creative methods to get financing quickly.
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Financing Made Simple

Financing a start up is daunting for many entrepreneurs. While hunting for cash, many find themselves sucked into flashy gimmicks promising “Free Money!” and “Fast Cash Now!” from websites and hiring consultants. Unfortunately, most of these promises are empty, leaving many small business owners searching for cash.

As difficult as it may seem, small business funding is available. For qualifying businesses, there really are opportunities to land free money from state, county and city governments, as well as private foundations and corporations. Continue reading