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How to Finance Your Micro-Entrepreneurial Business

At some point, your micro-entrepreneurial business may need financing to help pay for things, such as expansion. Maybe you’re a micro-entrepreneur with a home-based business that needs financing to warehouse your growing inventory. To grow your business, you will likely need financing at some point.

Debt financing and the micro-entrepreneur

Debt financing refers to loans and other types of financing where money is loaned to you and your company that requires repayment. Debt financing can mean taking out a business loan from your local bank or borrowing in other ways to get the funds you need. Many micro-entrepreneurs borrow money from sources ranging from credit cards to getting a second mortgage on their house.

Of course you want to be careful when borrowing money because carrying debt and paying back loans can be difficult if you have cash flow problems.

To gain funding, an operating business has an easier time gaining financing than one that is a start-up situation. Think about it from the lender’s point of view. If you were the lender, which type of business would you give a loan to: a business that is currently operating and has customers or a business that is brand new and untested and has no customers yet?

Therefore, to increase your chances of success at qualifying for a loan (if you’re a start-up situation), start your business immediately no matter how modestly. Then, consider getting the financing you want six months later. At that point, you aren’t seeking start-up or seed money. At that point, you’re technically seeking expansion financing, which is easier to get.

Here are some resources to help you understand and navigate the lending process:

  • 10K Right Away: This self-published book written by Scott Jordan is a must-read with great financing pointers.

  • Get Your Business Funded: This book written by Steven Strauss provides solid guidance on funding strategies for your business.

  • Lending Tree: At Lending Tree, you have the opportunity to submit your funding needs and have various lenders compete to provide you with lending programs to meet your goals.

  • LinkedIn: Business lenders and investors (and advisers) have their own groups at LinkedIn. This site provides you with contacts to inquire and help you with your funding needs.

  • Small Business Administration: The SBA has an amazing amount of resources for businesses seeking funding.

Equity financing and the micro-entrepreneur

With equity financing, someone (such as a venture capitalist) invests in your business and receives some type of equity (or partial ownership) in the business.

Give this type of funding serious consideration, because it can mean that you relinquish control of your business to some degree.

Here are some resources for equity financing.

  • Funded: This site is a network of investors and lenders that work with small businesses that need funding.

  • Gust: This site lists more than 40,000 accredited investors.

  • MicroVentures: This site helps small business owners connect with a network of investors and lenders that can provide financing of up to $30,000.

  • On Deck: This site has insights about small business loans and business credit.

Consider joint ventures as a micro-entrepreneur

You can also go the joint venture route with other firms to leverage your activities. A joint venture is when two or more people or organizations agree to launch a cooperative effort to accomplish an objective for mutual gain.

Always be open to joint ventures because they can work better than getting loans or giving away too much equity. Many entrepreneurs team up with others to make great sales.

Several active groups of entrepreneurs and investors are on LinkedIn. In addition, here are some active groups on LinkedIn to help you find creative ideas for financing your venture (or seeking joint ventures):

  • Joint Venture Bank

  • Second Bounce: Web Entrepreneurs and Investors

  • On Start-Ups: Community of Entrepreneurs

Going public as a micro-entrepreneur

Consider taking your micro-entrepreneurial enterprise and going public with it. Going public is the process of turning a private company into a public company creates shares the public can purchase in order to profit in the venture (like stocks that are purchased on Wall Street). It’s also known as doing an initial public offering (IPO).

Now, going public doesn’t just mean that you find an investment banker and a team of lawyers and accountants, get an IPO issued, sell stock, and become a millionaire (when you tally all of your shares at whatever the stock price is on the day it starts to trade in the stock market).

Even after you go public, you can still run the enterprise as a Chief Executive Officer (CEO) and essentially become the top employee of the firm (but you would have to answer to a board of directors, which oversee the company’s general management and have decision-making power over you and the company).

Maybe you don’t want to be a CEO. Instead, you could do what other entrepreneurs do. They sell the company and aren’t formally involved in the company after that. Instead, they negotiate (as part of the sale) to become a well-paid consultant to the company’s new management team.

For more information on going public, check out these sites:

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