Funding Your Business Goals, Debt-Free

There is only one thing between you and attracting other people's money: a strong value proposition. The value proposition has strong elements that make it valuable to your funding prospect.
This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.

The economy has forced many small business owners to get creative about infusing cash into their business. While banks are tightening their lending belts, small business owners and entrepreneurs are finding new ways to accomplish their goals using other people's money. The concept is nothing new in the market, it's just that the market is forcing alternative options for funding to be the norm. In this post, you will learn how to attract and retain the financial support your business requires through the use of other people's money. However, the first step is to begin with understanding what it is that you offer in terms of value. Learn how to put value into your value proposition so that you can attract support in the form of grants, sponsorship and government contracts. Another alternative to getting debt-free funding is accounts receivables leveraging, where your invoices become collateral for your business.

Putting Value in Your Value Proposition (V.P.)

There is only one thing between you and attracting other people's money: a strong value proposition. The value proposition has strong elements that make it valuable to your funding prospect. Most newer or smaller business owners miss the concept of the V.P. and therefore lose opportunities because they did not make a strong case for support. The strength of a value proposition relies mainly on the ability to make a clear distinction between you and your competitors. This gap is what I refer to as the "golden egg." It is where new business and markets reside. Being able to capture this audience effectively will give your business a leading edge.

There are several steps involved in creating a value proposition, and the funding entity will look for what results you can deliver for their marketing objectives. They will want you to demonstrate proof of your proposal's impending success. While there are certainly no guarantees, the amount of effort you put in your data collection process to show your funder a potential ROI, the more they respect your authority in your market.

Debt-Free Funding Options

Grants -- Considered one of the most popular and well-known resources for debt-free funding. Generally, grants are awarded to nonprofit entities; however, there are few instances where for-profit businesses can obtain them. The process for procuring grants depends largely on the resources that is providing the grant. For example, there are private foundations, community-based organizations, corporations and federal/state jurisdictions. These all require proposals and most will not accept unsolicited proposals. Typically, the information requested is the same, but there may be more emphasis needed in one or more areas of the project details. Most people seek "grant-writers" to compose a proposals to submit for funding. My recommendation is always to seek someone who understands the grant-seeking process and the various funding options and not just a great wordsmith.

Sponsorships-- Mostly associated with events, sponsorships are becoming ever more popular. The myth is that sponsorship is only granted to larger business entities or projects. The truth is that it really doesn't matter whether you are entrepreneur, small business or nonprofit -- sponsors participate for the primary reason of reaching their target market and achieving their marketing goals (period). The great attribute to sponsorship is that the support may continue year after year. Another positive aspect for seeking sponsorship is that you can go to small local businesses or corporate entities. There are approach methodologies that can enhance your chances of gaining their support.

Government Contracts -- This is a really solid debt-free solution. We all know the government will be around, and can be counted as a reliable resource for seeking debt-free funding solutions. One large government contract can put your business on the map. The only downside to government funding is the enormous paper trail that must be created when applying and reporting on the funds you acquire. My recommendation is that you have experienced resources available to assist in this part of the process to ensure you are meeting the requirements and don't risk losing funding. If you do lose funding for lack of efficiency, there may be stiff penalties, including paying back what you were funded and never having another opportunity to apply for government contracts. There are several certified business types that may qualify to receive request for proposals, or bids.

Some of the more popular ones are:

•8(a) Businesses
•HUBZone
•Service-Disabled Veterans
•Small Disadvantaged Businesses
•Women-Owned Small Business

There are extensive steps to prepare for these certifications.

Accounts Receivables Leveraging (ARL)

Rather than a loan, ARL aka factoring, is primarily structured as an outright purchase of accounts receivable on a non-recourse basis. This enables factors to say yes to cash advances on creditworthy invoices when traditional banks say no to business loans. This is by far one of the easiest was to infuse cash into your business right away, and surprisingly, most small business owners or entrepreneurs take advantage. While the cost varies by factoring companies, most businesses will look at the fees as the expense of doing business in exchange for immediate access to funds. Some businesses choose to factor all invoices while others take advantage of factoring services on an as needed basis.

Identifying Key Collaborative Partners

Finding the right partners is one of the keys to success in attracting debt-free funding for your business, event, or nonprofit. Collaboration helps to narrow choices for the funders which help them to allocate funding more equitably among candidates. It also cuts the competition for you! 50 percent of something is better than 100 percent of nothing.

Depending on the type of funding you are seeking, collaborative partnering is often perceived as a winning element to getting funding. The reason from a prospect perspective is there are fewer candidates to choose from, they are able to reach double the market-share with two partners, than one entity, and this is always good for them... and, for you, your business is now able to reach a market that otherwise would not have been available and you potentially gain the support of a large funder, which may not have happened alone.

In the nonprofit sector, finding partners is closely associated with cause-related partnering. This is where a business or corporation is seeking to demonstrate social responsibility by supporting a cause that matches their marketing objectives. Sometimes, is the entity seeking a nonprofit rather than the other way around. In either case, it is of great benefit to be prepare with a strong value proposition or cause statement that reflects impact and reach.

Here is a critical tip:

When requesting funding, do not use cookie-cutter proposals. Grantmakers are very sophisticated and can spot a generic template in the blink of an eye. This is not good for you, if they do. It demonstrates that you really gave no thought to composing your case, and well, why should they fund you, if that is the case.

Take the time to craft a unique proposal especially for your target funder. You'll be glad you did!

Popular in the Community

Close

What's Hot