How to Secure Funding for Your New Online Business

How to Secure Funding for Your New Online Business

Congrats on starting your new online company! This will be an exciting time when you will learn a lot about the world of business and hopefully make some decent profits along the way. However, there are some steps that you need to take before you can open your doors to the world, and one of the most important is securing funding for your organization.

Whether you are starting a dropshipping business or an e-commerce website, you will need to find the necessary amount of cash to get your company up and running and start producing your product or service. This idea may seem daunting at first, but the good news is that there are several avenues that you can follow when it comes to securing funding. Today, we will tell you about a few of the available options.

Why Proper Funding Is Important

First, you need to know why it is so important to properly fund your business. For starters, you will need money to get up and running. There are several startup costs that you can expect. They include creating your website, obtaining a proper business license, and building your inventory or setting up your dropshipping model. You will also need funds for the future, like when you will start marketing your business and hiring employees.

It is important to plan ahead and learn exactly how much money you will need to open your doors and keep your business running for the foreseeable future. The need to prepare and keep track of your finances will allow you to budget your money accurately, so you don’t run short of funds at the wrong time.

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You must also prepare for the speed bumps that will come along the way. You may have vendors fall short, face price hikes, or other unexpected variables. You also need to be prepared for the potential economic uncertainty that we see every few years. The companies that last through a recession are the ones that have a plan. You need to be smart with your funds by insuring your company, creating an emergency fund, and properly managing your inventory, so you aren’t paying for unnecessary storage when you need to be saving money.

With all of that said, let’s look at how you can secure these essential funds.

Funding Through More Traditional Means

Many entrepreneurs will try to get the money that they need by going to the bank and asking for a loan. This is still a very viable method. To have the best chance of success at the bank, you need to:

  • Monitor your credit score and ensure that it is in a good place.
  • Supply a detailed business plan that will show how the business will run.
  • Provide a plan and duration for how you will pay the money back, including potential collateral.
  • Go when the economic conditions are just right.

While banks provide businesses with thousands of loans every year, it is not a guarantee. If your proposal isn’t convincing or the bank can’t see the potential return on their investment, then you may be declined. But all is not lost.

The next tactic you can try is to secure your funding through a small business loan, like those supplied by the Small Business Administration. Since this service is through the government, the lenders are able to recover a portion of the outstanding balance if you happen to default on the loan. Because they have this insurance, they are more likely to approve a loan for your new business. Many of these lenders are also open to longer repayment terms, which could be exactly what your new company needs. The SBA also supplies a wide range of loan amounts, ranging from $500 to millions of dollars.

If you don’t have success through those more traditional funding sources, then you can try to secure financing or grants from specific organizations that only loan money to certain groups, from women to minorities. For example, there are programs designed specifically for women veterans, including The Jonas Project, LiftFund, and the Veterans Business Fund. If you are part of a certain group, then research online, and you are almost certain to find a lender that fits your unique profile.

Get Funding from Investors

If you are unable to get funding through the more traditional means, then there are more creative avenues that you can explore. One of them is securing funding through investors.

One of the most common ways to find investors is by looking into venture capital. This is essentially when a company or group of people invest in your business in exchange for a portion of the profits later on. Like with the bank, you will need to present your case, pitch your potential business, and have a plan for how you will make money. You can find and connect with venture capitalists by meeting them at industry events or by searching them out on social media.

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Another avenue that you can try to secure funding for your business is pursuing crowdfunding. There are many websites that have been around for years that allow you to list your product and service and then make a case for regular people around the world to invest in your dream. There are many websites with proven results, including Kickstarter, Indiegogo, SeedInvest, and more. You can attract investors by creating attention-grabbing videos, showing product designs, and offering rewards for certain donation tiers.

Then there is peer-to-peer lending, which is when you get loans that are funded by individuals  that get a share of the interest in exchange for their investment. You can search for peer-to-peer lenders online to find companies like Prosper and LendingClub. These websites make it easy because once you log on, you will see that there are thousands of investors ready and willing to give money to companies they believe in, and that could be you.

Turing to Yourself and Family

If all else fails, turn inward. If you are currently working a full-time job, but you want to make money for your future company, then consider finding a side gig.

By working part-time, you can earn extra funds that go directly towards the funding of your business. There are many great side gigs that can fit your skills and daily routine. You could work as a freelance writer or an online tutor, or you could drive for a restaurant, food delivery company, or ridesharing company like Uber or Lyft. If you go this route, then keep your eyes on the prize and put all of your profits into a savings account that is only meant for your business. Consider placing it in a high-interest savings account so you can earn even more each month that you save.

Finally, if you try the other avenues and you make money on the side, but you simply aren’t hitting your financial goals, then you might consider turning to your family. You don’t want to put anyone in your family out, but if you have someone that you know has been looking for an investment opportunity, then pitch them your idea. Just make sure to make it clear how you plan to pay them back. When you are mixing business with family, then it is essential that you put all of the terms in writing. The last thing that you want is to cause a rift with your family because they were expecting something that you didn’t promise. Needless to say, if you go this route, then you must tread carefully.

As you can see, there are many different ways that you can secure funding for your new online business. Consider one or several of the tactics above, and you can get your company up and running this year.

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