One difficulty that most startup founders and small business owners are all too familiar with is . . . fund-raising. In fact, a recent survey found that 27 percent of businesses responding reported being unable to access the funding they needed.
Yet, as troublesome as the process of finding and securing funding might be, small businesses have a bevy of options to pursue outside the normal means. On top of that, news out of the U.S. House of Representatives — its passage, in September, of the Wagner bill — could help ease some of the burden. (The Senate has yet to weigh in on the bill, which was opposed by the Obama administration. The new administration could react differently.)
If the legislation does eventually pass, its provisions would be of great benefit to microcapped companies. Businesses which are valued at less than $300 million could issue stock shares on an accelerated schedule, with less oversight by the Securities and Exchange Commission.
Supporters say the legislation has the potential to increase small businesses’ access to capital by allowing them to utilize fund-raising methods previously available only to large companies. The bill’s detractors believe that it will inhibit regulatory oversight.
Politics is not the only issue. Given the many fund-raising options already out there — debt, accounts receivable financing and equipment leasing, for example — small businesses may find it difficult to choose the best route to take. All these choices mean added complexity.
Small businesses can now think big with their funding.
Having access to some of the cost-saving provisions that large companies currently utilize could provide more opportunities for small business growth. However, company leaders could easily find themselves at a disadvantage if they don’t tread lightly.
Jumping into something they don’t fully understand — whether it’s taking on too much debt, securing the wrong kind of investors or signing unfavorable leasing conditions — could put their capital in a precarious position. Here are four viable ways startups can use large company fundraising tactics:
1. Equity crowdfunding
Crowdfunding is a relatively new option, a trait early-stage companies might gravitate toward. Although crowdfunding only accounts for 3 percent of capital raised, it’s a rapidly growing industry, worth $5.1 billion total and responsible for raising about $2 million daily.
This option allows early-stage startups and small businesses to raise up to $1 million through multiple investments, which can be…