Funding Your Startup
The Original Business Incubators
Today's entrepreneurs have more options than ever to finance their dreams, but COVID put its stamp on the startup funding world just as on every other facet of our world. There were signs of a startup revival before the advent of COVID-19 with nearly 775,000 businesses that were less than one year old in 2019, up from about 734,000 in 2018.
Fortunately, not even a global pandemic can contain the enthusiasm of the entrepreneurial spirit. A recent survey from SCORE looked at the impact of COVID-19 on startups and found although 43.9% of startups have a “wait and see” attitude about starting or continuing their business, 18.4% scaled up their plans and only 2.6% abandoned their business, proving that challenge breeds innovation to solve problems and relieve pain points.
With a continued spirit of perseverance,
Entrepreneurs are now looking for innovative ways to fund their dreams.
Bootstrapping with credit cards and savings or friends and family are tried and true options, but not everyone has the means, or the support, to do so.
Crowdfunding campaigns, such as Kickstarter, have emerged as a smart choice for some business ideas, but not all new companies—particularly those in service industries—are crowdfunding-friendly, and those that are, still require a fair amount of investment upfront to be able to stand out from the crowd of products that are vying for the limited dollars available.
Angel investors and venture capital funding may grab the headlines, but the reality is only 0.91% of startups are funded by angel investors, while a measly 0.05% are funded by VCs.
Turning to a megabank may make sense until you realize that they tend to loan to businesses that have already proven themselves to be profitable or are able to provide high-value collateral to guarantee the loan. This narrative was reinforced by the many stories of small business owners seeking Paycheck Protection Program (PPP) funding from big banks, only to be turned away, or worse yet, ignored completely.
So where to turn?
The original business incubators: Community banks. This country's entrepreneurial spirit was quite literally funded by community banks. Historically, community banks have been the originator for nearly 60% of business loans made to small and medium companies. Recently, community banks proved themselves again through the process of PPP, funding over five million loans to small businesses around the country. Our Village provided more than 500 loans to keep dreams alive and our community employed. Community banks can talk the talk and walk the walk.
But how does that work in favor of startups looking for funding?
Community bankers take time to know their customers. Decisions are based not only on financial decisions but also on valued relationships. Community banks have funding options available through the US Small Business Administration (SBA) that require limited collateral and have flexible equity requirements to retain ownership of the business that you’re putting so much hard work into. Community banks also have cash management solutions to grow with your startup as you scale. Altogether, community banks make the financial nuances of funding, launching, and scaling your startup easier to manage.
Want to know more about flexible banking options for entrepreneurs or funding available through our Village, contact one of our Villagers to get started!