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By Daniel Kehrer
Founder & CEO BizBest Media Corp.
Where to Find Money to Start Your Business
By Daniel Kehrer, MBA Candidate
Founder & CEO
BizBest Media Corp.
Need money to start a business? Join the crowd. Young American's - including tens of thousands still in school or recently graduated - are starting businesses at a record pace. Or maybe you're seeking a grant to get your dream creative project off the ground, and leverage it into a business later. Well, here's some good news: Despite what you might have heard, small loans of $500 to $50,000 are available through several private, online, nonprofit and government-sponsored sources. And at least three exciting new online funding platforms are now helping creative entrepreneurs line up money for all kinds of arts-related endeavors.
In short, the odds of finding funding are probably better than ever for young entrepreneurs. Here's where to look:
Person-to-Person (P2P) lending: This is also called peer-to-peer lending and thanks to some fast-growing websites, it's a booming alternative to traditional loan sources. Several P2P lending websites have grown rapidly, connecting people who have money with people who need it, while helping structure and manage loans between them. The average loan made through a P2P site is about $5,000.
The best P2P lending sites right now are , Prosper.com, LendingClub and RaiseCapital.com. Individual lenders (investors) compete with each to make loans to borrowers who have posted a loan request on the site. The better your proposal, the lower you rate is likely to be. Because P2P lending sites have to meet
state government lending rules (as well as federal SEC requirements), they aren't operating in all 50 states. Check their web sites for a list of areas they operate.
ACCION USA is a private non-profit organization that offers startup and expansion microloans of up to $50,000 to small business owners in the U.S., along with credit and business advice to small business owners who cannot access traditional credit. This organization offers loans for startups as well as established businesses, and specializes in working with qualified individuals who don't meet customary bank lending criteria. You'll find an application and other helpful resources on the web site.
Count Me In, a non-profit organization, makes microloans to women entrepreneurs through its Micro to Millions Award program. For details, visit their website at http://www.makemineamillion.org/.
Crowd funding for creative projects: Kickstarter has quickly become the largest online funding platform for creative projects. Every month, thousands of people pledge millions of dollars to creative projects in the fields of music, film, art, technology, design, food, publishing and others. It's a new form of commerce and patronage that's not about investment or lending. Project creators keep 100% ownership and control over their work. In return for money, they offer products and experiences that are unique to each project. Funding on Kickstarter is all-or-nothing. A project must reach its self-chosen funding goal before time runs out or no money changes hands. That way, creators aren't expected to develop their project without necessary funds, and it lets you test concepts risk free. Two other sites doing similar things are RocketHub.com and IndieGoGo.com.
Community Development Financial Institutions: About 1,000 CDFIs nationwide make microloans for business startups mainly in lower-income communities, serving both rural and urban areas. Use the handy CDFI State Locator to find one near your campus. Here are a few CDFI funding examples:
- The Utah Microenterprise Loan Fund, a certified CDFI, is making loans of up to $25,000. Their motto is "Building brighter futures through small business." A $10,000 micro enterprise loan from the Utah fund helped Somer Gardiner get her Salt Lake City yarn store, Soul Spun Yarn, off the ground.
- Enterprise Corporation of the Delta, a CDFI in Jackson, MS, has helped train or fund thousands of entrepreneurs in the Mississippi Delta region it serves. It helped back Computers, Inc., a small business owned by three women. Computers, Inc. installs custom equipment for schools and businesses.
- Self-Help, a CDFI in North Carolina, provides small business loans in several southeastern states and elsewhere around the country. Loans range from a few thousand dollars and up to start, buy or expand a business or non-profit.
The StartupSmarts section of the BizBest website has more help guides and articles for startup entrepreneurs.
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By Daniel Kehrer
Daniel Kehrer, Founder & CEO of BizBest (www.bizbest.com), is a leading small business expert who has started four businesses, written seven business books and delivered quality advice and information to business owners for over 20 years. He has been Editor-in-Chief of Business.com and a business columnist, author and media entrepreneur in New York, Washington, DC and Los Angeles.