6 Small Business Funding Myths…Busted!

One of the biggest obstacles standing between a viable idea and an operating business is money. A lot of new founders think they need a lot to even get started, that they’ll need more as their companies grow, and that they can’t possibly consider entrepreneurship unless they have ample funds.

I dispel some of these myths in my new book The Business Money Blueprint, which explains the full gamut of financing, from shoestring budgets to bartering your services to crowdfunding platforms like Kickstarter. I’ve covered the small business space for three decades, and here are six myths you’ll hear that aren’t always true:

1) You need a lot of money to get anything started. I got my freelance writing business going with a used 386SX desktop, an equally used 1200-baud Texas Instruments modem and the cheapest possible AOL subscription. All the financial ducks don’t have to be in a row to get started. Sometimes you just need to jump in.

2) Anything that needs overhead is expensive and requires a big investment. This may be true for a Michelin star restaurant (although fans of The Bear know otherwise…), but there are still ways to get a minimum viable product or service out there without a huge investment. For example, fitness coaches can rent space at an existing gym by the hour, bakers can use shared commercial kitchens and consultants can work out of coworking spaces. You can get up and running, start bringing in revenue and grow into your own space when the time is right.

3) Banks and SBA loans are your only option. These options can be good for the right person, but there’s also friends and family, crowdfunding and even angel investors, all of which are good candidates if a bank loan isn’t in the cards. There are also microloans for business with smaller funding needs. In my book, I devote an entire chapter to alternative financing options you may not have even thought of.

4) Without upfront money, my business will fail. This is by far the most paralyzing myth that new founders deal with. As my friend Kimberly Stansell, author of Bootstrapper’s Success Secrets, will tell you: it couldn’t be further from the truth. In fact, an enterprising founder’s sweat equity (that time, energy and effort you put in for no pay in the early stages) is worth its weight in gold.

5) Business plans are complicated and difficult to put together. If you’re picturing some long, formal document, you may never even get started, and for good reason really. It just sounds too difficult to tackle. In my book, Blueprints Beat Cocktail Napkins, I walk through a simple way to build a business plan that will impress banks, investors and friends/family. It comes with a digital version you can just fill out online or as a PDF.

6) Take outside money and you'll lose control of your company. This one always scares off entrepreneurs who could benefit from outside capital. Investors do want a return and some want a seat at the table, but not all investment comes with strings attached. Look for an investor who brings more than just money to the table (e.g., connections, experience and doors you can't open on your own). Always do your homework, but know that not every investor is a shark and that the right deal might surprise you.

The bottom line: money matters, but it’s not always the gatekeeper that people make it out to be. These myths may apply in certain cases, but they’re not universal. Your own situation, business and its growth path will ultimately point you to the right funding approach.

Want more? I cover the funding side of running a business from start to finish in The Business Money Blueprint.