Financing for Millennial Entrepreneurs from Startups to Growth Strategies

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Financing for Millennial Entrepreneurs from Startups to Growth Strategies

Many members of what may be the most entrepreneurial generation to date are postponing dreams of business ownership for one basic – but important reason: Financing. Let’s explore some of the financing programs Millennial Entrepreneurs can access to start and grow a small business.

Millennial Entrepreneurs Lack Startup, Small Business Financing

Financing for Millennial Entrepreneurs from Startups to Growth StrategiesMillennials believe their generation may be the most entrepreneurial yet, and they may have the numbers to prove it. 72 percent of would-be Millennial entrepreneurs have considered starting a business of their own according to a recent Economic Innovation Group report.

Although many young adults believe entrepreneurship is “essential” to the health of America’s national economy, 4 out of 10 say it’s out of reach for them personally and 6 out of 10 say that the government hinders entrepreneurial success. Millennials are willing to work hard but financial concerns have steered them toward risk-averse career paths.

8 Ideas for Millennial Entrepreneurs Who Need Startup and Small Business Financing

4 Types of Startup Financing for Millennial Entrepreneurs

1. Bootstrap

By definition, bootstrapping is “getting oneself into (or out of) a situation using existing resources.” It’s the idea that you should start trading up in small ways until you can ultimately acquire, do or achieve the bigger goal.

It should encourage Millennial entrepreneurs when they find out that many small businesses are started with little or even no capital. By launching the sale of low-cost goods or services in advance of more costly alternatives, startup business owners can begin to squirrel away funds and create confidence among potential investors.

2. Attract Investors

Not so long ago attracting investors was a matter of finding big money and persuading those who control it to invest in your business idea. Success came down to “who” you knew and who you could get your ideas in front of. Today traditional investors are just the tip of the iceberg. Crowd funding, kickstarters, angel investors, peer to peer lending and many variations of ‘investor’ financing programs exist to help make the ideas of Millennial entrepreneurs and other startup business owners a reality.

3. Startup Business Loans

Though approvals aren’t always easy to come by, traditional banks and small business lenders are still in the business of funding startups and small businesses. In addition, if you have collateral such as real estate and other assets which can be liquidated, your chances of obtaining startup financing from traditional lending sources are much-improved.

4. Partnerships

When you have a truly unique, compelling business idea, protecting it from people who might co-opt it or build a competitive option before you can get your idea off the ground could mean you miss the chance to find great partners. Working with one or a small team of people who share your vision could be the key to finding more money to launch your startup and get your new small business idea out of the gate more quickly.

4 Types of Small Business Financing for Millennial Entrepreneurs

Once your startup is up and running you may have immediate access to important small business financing tools that can expedite or infuse cash flow into your business.

1. Small Business Invoice Factoring

Businesses that sell to other entities (other businesses, agencies, government contracts, etc.) and invoice their customers or wait on promised payments (e-commerce Amazon vendors, Zulily merchants, app developers, etc.) can speed up cash flow by factoring invoices.

Invoice factoring has been used for centuries by business-to-business (B2B) organizations to speed up cash flow. Instead of waiting on customer payments, small businesses that factor invoices can get free, same-day funding for a small fee (called a factoring fee).

B2B sellers can factor invoices from day one and speed up cash flow in order to grow more quickly. This can be especially beneficial for small businesses who may have to offer 30, 60 or even 90-day payment terms to big customers who call the shots or as a competitive advantage.

2. Small Business Cash Advance

Once your startup has been operating for a few months, you may be eligible for business cash advance or merchant cash advance funding. Cash advance financing is a cash infusion that can give your small business the money needed to grow more quickly, add equipment, fill bigger orders, expand capacity, add new inventory, etc. The amount offered to your business is calculated based on average monthly sales and it’s usually repaid over a short term – 6 to 18 months – as a small percentage of future sales.

While traditional bank financing often requires borrowers to have collateral equivalent (or in excess of) the amount financed, cash advance financing is based on sales trends. Cash advance approval rates are much higher than bank business loan approval rates, and cash advance business loans can be funded in a matter of hours (vs. the weeks or months a bank loan approval might take).

3. Equipment Financing

Specialty business financing programs for purchasing or leasing equipment are also available to the young businesses owned by Millennial entrepreneurs. Like cash advance financing, they can be approved and funded in a matter of hours and approval amounts are often based solely on sales trends. While cash advance financing can be used for a wide variety of purposes, equipment financing is generally dedicated to the purchase or lease of specific equipment.

4. Business Line of Credit

A business line of credit is another short term financing program small business owners can tap after being in operation for even just a few months. Line of credit financing can give you instant purchasing power or ensure that you have money available if something goes wrong and you need to repair or replace equipment, expand or repair buildings, jump on fast-emerging opportunities or cover payroll during an unexpected or cyclical sales lull.

Like cash advance financing, it’s repaid automatically and the cost of financing is transparent. Business line of credit financing is usually renewable, so that a business owner can make repeated draws against the amount. This is a benefit when a business owner wants to take as little financing as possible and manage credit very carefully; it’s also really helpful when the amount of financing needed isn’t fully known ahead of time.

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