This idea sheet is designed to help you consider potential financial sources that will fuel your business growth in more immediate terms. Please review, contribute your own ideas and consider offering to follow up on one or more of these sources for the group. Send ideas to Dan Nissen.
Types of funding
You can get money to run your business in many ways. The primary categories are: equity, debt, grants and crowdsourcing. Equity is money received in return for a part of the ownership of the business. Debt is in exchange for a promise to repay. Grants come from organizations that need help with their mission and they don't have to be repaid. Crowdsourcing is where you get money from people either because you have a mission they like, or in return for early copies of the product, or they loan you money, etc. Another (usually the best) way to get money is through retained earnings. This is where you actually start the business and make money to invest in the business.
How you finance your business has many implications. If you get loans, you will need to have the cash flow to make the payments. If you go with angel or venture capital equity financing you will need a plan for an exit in around 5 years, which means you probably won't be involved after that.
Grants
Microgrants
WHAT THEY ARE: Small grants offered to businesses who meet a narrow focus of criteria.
You can apply for a Microgrant from http://www.microgrants.net/
You’ll need to work with a partner to access these grants https://microgrants.net/partner-agencies-2/:
• WomenVenture
• Project For Pride in Living (PPL)
• Summit Academy OIC
• Jeremiah Program
• Daily Work
• Midtown Global Market
• African Development Center (ADC)
• African Economic Development Solutions
• American Indian Community Development Corporation
• American Indian OIC
• Takoda Institute
• Avivo
• Beacon Interfaith Housing Collaborative
• MNI SOTA FUND
• Black Women’s Wealth Alliance (BWWA)
• Bolder Options
• People Responding in Social Ministry (PRISM)
• Twin Cities Rise!
• Wilder Foundation
• Minneapolis Consortium of Community Developers (MCCD)
• Metropolitan Economic Development Association (MEDA)
There are many more organizations listed on https://microgrants.net/partner-agencies-2/.
This page on microgrants.net describes the community each of these organizations serves. Generally, you must be a member of that community to get help from them.
It is a $1000 grant you don’t have to pay back. I was told by a board member (Jim Weichert) that they were giving out over 1 per day.
Crowd Funding
WHAT IT IS: The action of requesting assistance for business funding from individuals or non-traditional funding groups to assist with business start-up and growth. Crowd Funding may include setting up a donation page on your web site, asking friends and family for contributions and loans and establishing requests on web sites specifically geared to raise funds for worthy causes. Another aspect of crowd funding is tied into the United States of America JOBS Act which allows for a wider pool of smaller investors with fewer restrictions.
You need to know how much money you need and what you are willing to give to get it. Some of the sites put programs up in sorted order by how fast they have raised money. If you are using a donation or reward site, and you have money coming in from someone you know, you should get that funneled through the crowd funding site, so as to hopefully show a fast raise rate early on. That will get you to the top of most of these sites, and thus more eyes on your request.
How to choose your crowd funding site
Here are some articles https://www.gofundme.com/c/blog/top-crowdfunding-sites, https://www.ownr.co/blog/how-to-choose-a-crowdfunding-platform/ . Here is another roadmap: https://www.shopify.com/blog/crowdfunding . Another review of the sites available is at https://www.businessnewsdaily.com/4134-what-is-crowdfunding.html .Types of crowdfunding
There are four types of crowd funding: Micro finance, Credit based, Rewards based and Equity crowdfunding. Here are a few of the sites sorted by type.
Micro Finance Crowdfunding
- Kiva
- Acionus
Credit Based Crowdfunding
- Prosper
- Lending Club
Rewards Based Crowdfunding
- Kickstarter
- Indiegogo
- Fundable
- Go Fund Me
Equity Crowdfunding
- Wefunder
Descriptions of various crowdfunding sites
You may wish to look into the following web sites on Crowd Funding:
• Kickstarter: Emphasis on IT development; project is either totally funded, or investors are given back their money. Based on a donation model for now. Web Site: www.kickstarter.com
• Wefunder: “Norman and his three cofounders are alums of other startups including SoChange, Smartcloud and Crowdly."We're serial entrepreneurs," Norman says. "We created the kind of solution that we'd want for our own startups." Web Site: http://wefunder.com/
• Indiegogo: Coined as a traditional crowd funding web site. Web Site: http://www.indiegogo.com/
• Microventures: Austin-based, an online peer-to-peer investment marketplace. It helps accredited investors pool their cash together and get access to startup funding opportunities that aren't usually available outside of the traditional venture capital network. Web site: www.microventures.com
• Lending Club: "By allowing our members to directly invest in and borrow from each other, we avoid the cost and complexity of the banking system and pass the savings on to you. Both sides can win: better rates to borrowers and better returns to investors. It's that simple." Web Site: www.lendingclub.com.
• Prosper.com: Connects people who want to invest money with people who want to borrow money. Web Site: http://www.prosper.com/
Sites that help banks and businesses connect: https://www.finder.com/business-loan-marketplaces-like-lendio has some information on several business loan providers.
• Biz2Credit: Founded in 2007, Biz2Credit (www.biz2credit.com), is an online small business platform that creates access to a competitive environment of lenders to empower the entrepreneur. The online platform matches entrepreneurs with credit solutions based on their business profile and preferences in a safe and price transparent environment.
• Boefly: With BoeFly it’s easier than ever to connect with the right small business lender. With a single click we match your loan request with compatible lenders for evaluation. Web Site: http://www.boefly.com
• Lendio: Find the Right Business Loan. You answer a few questions. We give you the best options. Then you choose the right loan. Web Site: http://www.lendio.com .
• Smallsums: A service for the homeless and poor people in the Twin Cities. Small Sums provides permanent solutions for homelessness. Web Site: http://smallsums.org/ .
State of Minnesota Resources
JoinUsMN is a new initiative trying to attract companies from outside Minnesota. There are some funding options on this web page.
Resource Links for Finances
Web Site: https://www.score.org/financing-and-loans-resources
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