Funding Your Startup
The Original Business Incubators
In today's entrepreneurial landscape, there's an array of options available to finance budding dreams, although recent global events have left their mark on the startup funding arena just as they have on various aspects of our world. Prior to the recent challenges, there were already indications of a resurgence in startups, evident in the increase from approximately 734,000 new businesses in 2018 to nearly 775,000 in 2019.
Despite external pressures, the entrepreneurial drive remains undiminished. Recent research from SCORE delved into the impact of current circumstances on startups and found that while some, about 43.9%, are adopting a cautious "wait and see" approach, a significant 18.4% are scaling up their plans, with only a small 2.6% abandoning their ventures. This resilience underscores the capacity of innovation to address challenges and alleviate pain points.
Entrepreneurs are now exploring novel avenues to fund their aspirations. Traditional methods like bootstrapping with personal resources or seeking support from friends and family remain viable, yet not universally accessible.
Crowdfunding platforms like Kickstarter have emerged as attractive alternatives for certain business concepts. However, not all ventures, particularly those in service sectors, align with crowdfunding dynamics, and those that do often require substantial initial investment to distinguish themselves.
While angel investors and venture capital tend to capture attention, their involvement is limited, with only a fraction of startups securing funding through these channels.
For many, approaching large financial institutions may seem logical, yet such institutions typically favor established businesses with proven profitability or substantial collateral. This reality was highlighted during recent episodes during COVID 19 where small business owners were seeking support, such as through the Paycheck Protection Program (PPP), encountered challenges with major banks.
So, where can entrepreneurs turn? Back to the roots: community banks. These institutions have long been pillars of support for aspiring businesses, historically originating the majority of loans for small and medium enterprises. During recent times, community banks once again demonstrated their commitment, facilitating millions of loans through initiatives like the PPP, preserving countless dreams and jobs within our communities.
But how do community banks benefit startups seeking funding? Unlike larger institutions, community bankers invest time in understanding their clients, basing decisions not solely on financial metrics but also on trusted relationships. Moreover, community banks offer funding avenues through programs like the US Small Business Administration (SBA), which demand minimal collateral and feature flexible equity requirements, allowing entrepreneurs to maintain control over their ventures. Additionally, these banks provide tailored cash management solutions that evolve with a startup's growth trajectory, simplifying the financial complexities of launching and scaling a business.