Starting An Online Business: Where To Find Funding?

20 February of 2015

With the economy looking up, more and more businesses—small and large—are popping up across the nation. However, while the number of brick-and-mortar businesses is on the increase, so too is the number of online businesses. There are many attractive benefits to operating a business online including decreased overhead costs and the possibility of drop-shipping which reduces the need for physical inventory. One of the most sought after benefits though, is of course the much larger audience available to you online.

However, most online business owners seem to face the same challenge. Funding! Simply put, you need adequate funding throughout the life of your business. However, finding for startup costs is notably the most difficult type of funding to obtain, primarily because getting your business up-and-running usually entails a great deal of money.

Luckily though, there is a plethora of different ways that ambitious entrepreneurs can find funding for their online ventures; from traditional help from the Small Business Administration (SBA), to more creative methods like crowdfunding. While I won’t go into detail about each and every method, I will discuss three of the most popular methods online business owners are using to obtain funding:

Bootstrapping

In general, most ecommerce ventures generally start out a one person with an idea. Because of this, it should come as no surprise that self-sufficiency often becomes the first point-of-impact when it comes to finding funding. Largely one of the most self-sufficient methods of obtaining funding is through bootstrapping.

Bootstrapping, simply put, is the practice of relying on your own financial resources to fund your business. This means that your bank accounts, savings accounts, and so on are all viable resources for funding. However, most folks resort to using their credit cards since they often provide access to larger amounts of spendable cash.

The benefit of bootstrapping is that you are totally in control of how your online ecommerce venture operates, whereas if you had other investors, you would have to account for their input and take advice from them as well.

Banks and Other Lending Institutions

While it may not be the first funding option for most ecommerce business hopefuls, a small business loan issued from a bank, is often the option that is first thought of. The preparing of a business plan, dressing up in your nicest clothes, and meeting with a clean-cut, suited bank official, are all common scenes in the world of lending.

It is important to realize though that there are literally dozens of different types of loans available to new and existing businesses, whether online or not. With that being said, it is important to do your homework. Find out which loans are available in your area. There are secured and unsecured loans, or even an asset based line of credit, offered by lending institutions like National Funding. It is vital to know what you’re getting into beforehand.

Of course, with different types of loans comes a variety of ways to repay them, as well as varying terms for said repayment. If you don’t study the conditions of the loan closely, you could end up in the red before you even get started.

Crowdfunding

This funding method is fairly new, but don’t let that fool you. Crowdfunding is a fun, new way to obtain funding that doesn’t come out of your own pocket. Instead, you broadcast your ecommerce business idea on websites like Kickstarter and Indiegogo for others to see.

If the people who view your idea like what they see, then they can choose to provide a specified amount of money to assist with getting the idea started. Keep in mind though, that while you may not be paying something upfront, most of the people who decide to help fund your idea, do so with the notion that they will get a little something in return.

As an example, let’s say you were a musician looking to sell CD’s, mp3s, and merchandise on your website (which you hope to start via crowdfunding). You would need to set incentives for certain donation amounts. So if someone decided they liked your music so much that they were going to donate $99.00, then you might offer them a signed deluxe copy of your new-release CD. For those that offer more than that, then you would offer a larger incentive. Get the picture?

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