MONEY Startups

This One-Man Business Sells Millions Worth of Swag Out of a Garage

"Your Logo Here" written on canvas tote bag
Tony Garcia—Getty Images

One key lesson: Outsourcing.

Need a jumbo canvas shopping bag printed with your company’s logo? What about a twist-action ballpoint pen with your company’s name and web address on it?

Harry Ein is your man.

Since July 2010, Ein has run his one-person business, Perfection Promo, from the three-car garage at his house in Walnut Creek, Calif., providing swag to clients from corporations to sports teams. He started his business after departing a former employer in the same industry.

Since then, he says he has won business from clients including Microsoft, Safeway, Benefit Cosmetics and the NBA. This year, he projects revenue of $4 million at the profitable firm. In 2015, Advantages Magazine, a trade publication, named him the #1 sales rep of the year for promotional products.

Ein is one of the growing number of Americans who are creating businesses that are breaking $1 million in revenue with no employees other than the owners. U.S. Census Bureau counted 30,174 “nonemployer” firms that had revenues of $1 million to $2,499,999 in 2013, up from 23,176 in 2009—a 30% increase.

So how does Ein do it all as a one-man band? Well, he doesn’t, not exactly.

His not-so-secret strategy to keeping his firm ultra-lean is outsourcing. By reading industry publications and networking in his industry, he found out about a company called iPROMOTEu, in Wayland, Mass. It provides back-office services such as trafficking orders and collecting money from customers to independent firms like his. By affiliating with iPROMOTEu, he says he has been able to free his time to focus on sales. And it costs him less than maintaining his own staff. “If I didn’t have a billing company and all of that back end stuff, I’d have to have three to five employees,” he says.

Here’s how Ein built his profitable business to $4 million in annual revenue since starting it in July 2010.

Make the most of what you already know. When Ein was getting started, he picked a business in which he could use his natural gift for selling. In his late teens, Ein used the food money his parents left him while they were on vacation to buy a few Tickle Me Elmo dolls when the craze for them was in full swing and they were selling out. He brought the toys to a local mall and sold them to frantic shoppers who couldn’t find them in stores. “I was able to sell them for double and triple the cost,” he says.

After college, Ein worked as a sales executive at The Ad Solution, a provider of branded merchandise such as office gifts, getting crash course in his industry. He worked there nearly nine years before making the leap into his own firm. The knowledge and connections he built paid off. He says he hit $700,000 in sales his first year.

Live lean. Now that Ein is married and has a two-year-old son, he has the type of financial responsibilities that drive many people into the seeming security of a W-2 job. By working from home, he is able to reduce financial pressure on himself, keeping overhead at his business down and his commuting costs to zero. If he needs to meet with customers face to face, he goes to see them.

There’s an added bonus. Working from his home office gives him more time to play with his toddler. “We have a park that’s 20 yards from our house,” says Ein. “At 5 pm, I’ll try to take him over.”

Do the math. Ein decided on his current outsourcing model after talking with owners of other promotional products companies about how they were running their firms. One owner said that his company—which brought in $20 million in sales with 25 employees—had been better off when it was just one or two people, because of the costs and issues that arose when hiring employees. “Sometimes we’re not profitable,” the owner told him. That helped Ein settle on his own, outsourced business model. “You should do as much research as you can on what others in your industry are doing, and how you can streamline your business the best way,” he says.

While Ein isn’t averse to hiring employees, he finds he has the help he needs right now from iPROMOTEu. Meanwhile, he likes knowing he is keeping the people who make items like silk-screen T-shirts for him at other firms busy. “It might not be employees under my business name, but I know we’re putting people to work,” he says.

Don’t be afraid to talk with your competitors. Ein finds it more beneficial to share information freely than to play things close to the vest with rivals. “They are going through the same experiences as you,” he says. For instance, he’s never hesitated to recommend good factories to other firms. They, in turn, have suggested other plants to him. “People who don’t want to share anything hurt themselves,” says Ein. “When you can share ideas you can find resolutions that will help you, as well.”

MONEY Small Business

Tennis Star Andy Murray Ventures Into Crowdfunding Start-Ups

What kind of businesses will the UK tennis star invest in?

TIME Kickstarter

Inventor Raises $120,000 for a Zombie-Fighting Tool on Kickstarter

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Laura Natividad—Getty Images/Flickr RF

The invention has a few practical uses too

Americans have plenty to worry about these days, including terrorism, infectious diseases, to the specter of an 18-month-long presidential election.

But entrepreneurs can apparently move a whole bunch of units playing up fears of completely fictional dangers too. That has been inventor Marvin Weinberger’s strategy. He has raised more than $120,000 dollars in a Kickstarter campaign for his new product called the “Lil Trucker,” which he pitched to prospective investors in a video that shows the tool’s capacity to fight off a zombie invasion.

According to the Philadelphia Inquirer, the tool is actually quite useful outside of a zombie combat scenario. The Lil Trucker weighs just 1.3 pounds, but comes loaded with features: “a glass breaker, folding saw, can opener, hatchet blade, hex wrench, pry, wedge, hook, hammer, nail puller, wire twist, gas valve wrench, spanner, and strap cutter.”

Despite the obvious practical uses for such a tool, Weinberg “thought that the tool itself needed something pretty sexy to market it,” according to the report.

Mission accomplished, Marvin.

MONEY Startups

4 Secrets of Crowdfunding Success

150604_EM_Crowdfunding
Andrew Paterson—Getty Images

Turns out, it's not as easy at it looks.

Driving a tricked out BMW motorcycle with a refrigerated compartment attached like a sidecar, Simon Anguelov earns money to pay for community college in San Diego as a mobile ice cream vendor. The 20-year-old MiraCosta College student took out $30,000 in bank loans to create the customized bike with help from his sister, who cosigned for him.

Recently, it dawned on Anguelov that it would be easier to generate business if there was an Uber-like app people could use to order ice cream deliveries from vendors like him or ice cream stores. In May, he launched a campaign to get funding for IceCreamZilla, an app-enabled network, on the crowdfunding site Kickstarter. Kickstarter enables donation-based crowdfunding, where individuals make donations to business ideas they want to bring to life.

“Ice cream vendors like me would benefit from an app like this,” says Anguelov. “It would draw a lot of business to the industry.”

But Anguelov was in for a surprise. It has been harder than he expected to raise money on Kickstarter. By the time his campaign ended, he had raised only $1,980 toward his $25,000 goal. Under Kickstarter’s rules, that meant he didn’t get to keep any of the money. “It’s really hard to spread the word,” he says.

But he didn’t give up. He restarted his campaign on June 1, this time with a smaller goal of $5,000—and on his first day had already hit $3,015, with 59 days to go.

It’s easy for new entrepreneurs to get excited by the potential to raise money on sites like Kickstarter, where fundraisers have collectively snagged $1.7 billion since it launched in 2009. Some entrepreneurs have hit the jackpot. Pebble Watch, a smartwatch, raised $20.3 million in the site’s most funded campaign to date, and the Coolest Cooler—a picnic accessory that comes with a waterproof Bluetooth speaker—raised $13.2 million, which was good for second place.

And Kickstarter is just one option. In 2014, crowdfunders in North America raised $9.46 billion, a 145% increase from the year before, according to a recent global report from Massolution, a research firm in Los Angeles that collects data from 1,250 active crowdfunding sites around the world. Its data included both donation- and equity-based crowdfunding, where companies typically sell an ownership stake to investors.

Still, as Anguelov discovered, crowdfunding isn’t as easy as the success stories we constantly hear make it sound. Here are four key things to know before you start your campaign.

Successful campaigns start way before the launch. Many crowdfunders start building their following on social networks months before they actually launch a campaign. There’s a reason for this. Crowdfunding campaigns have a time limit. It’s not easy to reach your funding goal if you don’t start working on building up your social media following—a primary way to share these campaigns—until the day you launch.

“It’s hard to get viewers unless you have a presence on Facebook,” says Anguelov, with 20-20 hindsight. “I don’t have any followers.” This time around, he has started building his Facebook following and plans to join groups on the social media site where he can talk about his project. He has also changed his rewards. Previously, he offered discount coupons; this time, he is offering some extras to local donors who pledge $99 or more, such as a chance to meet him and have him personally deliver 25 ice cream treats.

It pays to set realistic goals. Each donation-based site has its own rules, but on some donation-based sites, including Kickstarter, you don’t get to keep any of the donations if you don’t hit your funding goal. However, it is possible on the site to set a stretch funding goal once you meet your initial goal and try to raise additional funds.

Other sites will cut you more slack, but you’ll pay for it. For instance, Indiegogo lets you keep all the money you raise, even if you miss your target. However, it charges a 4% fee if you hit your goal versus 9% if you get part of the way there. That means that if you raise $100,000, you have to pay the site $9,000.

Industry-specific sites may work best if you’re a niche player. If you’re looking to attract the attention of high-net worth investors, equity-based crowdfunding sites that target investors in your sector may be your best bet. Visio Financial Services, a 45-employee company in Austin that was founded in 2011, used this approach. It lends money to private investors who are purchasing single family homes to flip or rent. About a year ago, the firm raised $10 million in a debt facility through the real-estate crowdfunding site Realty Mogul, says CEO Jeff Ball. “There are a lot of accredited investors who have money they would like to invest in alternative asset classes,” he says.

However, gaining entry to such platforms isn’t easy. “It’s getting more crowded,” says Richard Swart, crowdfunding and alternative finance researcher and scholar-in-residence in the Institute for Business and Social Impact at the University of California, Berkeley’s Haas School of Business. “It’s becoming more difficult to attract interest.” Plus, they have little incentive to promote deals that aren’t right for their particular investors. “Many of these platforms are rejecting 90% to 95% of companies seeking funding,” says Swart.

Crowdfunding may not help you get more financing. Getting a bank loan or credit card and making timely payments can help you build a financial track record. But raising money on a crowdfunding site may not carry much weight with future lenders. Ask David Goldin, president and CEO of AmeriMerchant, a New York City firm that provides working capital to small businesses. “It’s irrelevant,” says Goldin. Why? Interest by people who aren’t professional investors or lenders doesn’t necessarily signal to someone like him that a business has staying power. It’s similar to the world outside crowdfunding platforms. “A lot of people invest in a restaurant—and most restaurants fail,” he says.

MONEY Small Business

Brooklyn Entrepreneur Happily Works 7 Days a Week

Artist Sigal de-Mayo explains how she launched her business and opened her first store.

Sigal de-Mayo is the creative force behind Insiders1, a Brooklyn-based small business that creates wearable and usable art out of photo collages she shoots, designs and prints. After 16 years selling at street fairs and holidays markets, Insiders1 has just opened its first brick-and-mortar location in the Williamsburg neighborhood of Brooklyn. Wares range from leather gloves, bags, and wallets to silk scarves, clocks and puzzles. Her advice to other entrepreneurs: Make sure you have the passion necessary to dedicate all your time and energy to your company.

MONEY Startups

This Woman Turned a Backache Into a Million-Dollar Home Business

Katherine Krug

Working around the clock at a mobile app startup called Everest, Katherine Krug suffered a side effect from long hours at her desk: sciatica.

The back pain was intense, she recalls: “It was hard for me to sit.” But in her quest to alleviate the pain, Krug, now 33, stumbled onto a million-dollar idea.

The back pain itself was her inspiration. Unable to attract enough users, Everest shut down in 2014, and Krug found herself “emotionally spent” and “trying to figure out what to do with my time.” So she and a friend began experimenting with ways to create a strap that would provide back support.

As she mentioned the idea to friends and acquaintances, she discovered many fellow sufferers among them—and began to suspect there was a big market for a product that could help. Asking around, she was referred to industrial designers who helped her create a prototype for the supportive strap. She launched a new startup, Better Back, last year and now runs it from home in San Francisco.

Krug didn’t initially have the money to manufacture her product so she turned to crowd funding site Kickstarter. By effectively letting investors put in pre-orders for the product, the campaign raised $1.2 million. Krug plans to start shipping the preorders, currently priced at $65, this fall.

Believe it or not, Krug is one of many solo entrepreneurs who has grown a business to more than $1 million in revenue in recent years. Data released last week by the U.S. Census Bureau counted 30,174 “nonemployer” firms that brought in $1 million to $2,499,999 in 2013, up 2% from the year before.

So how did Krug create her million-dollar, work-at-home business? Here were some her successful strategies.

Get clear on your goal. Krug is a fan of Tim Ferriss’s book, The 4-Hour Workweek. But given the realities of the startup scene, she found the goal of working four hours a week elusive. “No matter how much you try to conceive of a business that gives you some work-life balance, there’s so much work that goes into it,” she says.

After Everest, she worked as interim COO for a company she really liked and was offered a permanent position, but, she says, “I had this nagging feeling in my stomach that something wasn’t right.” She realized she does her best work when she has flexibility in how she works.

Being an entrepreneur offered the freedom and control over her schedule that she wanted, but she wanted to do it differently this time. She didn’t want to slip back into her old lifestyle, where juggling management of her team with getting the actual work done led to very long hours. “I had all of these health issues from constant stress and lack of sleep,” she says. At the same time, though, she did enjoy working with others, so she looked for a business idea where she could still work in a collaborative way.

Design a business around your ideal lifestyle. Krug decided to use a business model where she works with a flexible team of contractors. “I’m really focusing on finding people who don’t need management,” says Krug. “I think a contract model really serves that. You can get people who are experts in their own field. You come to the table as equals and can have a wonderful collaboration.”

To launch the business, she contracted with two industrial designers who live in Washington State and Maine; enlisted a marketing firm based in Brazil; and hired a virtual assistant in the Philippines through the freelance platform oDesk, which was recently renamed Upwork. To keep everyone in sync, she uses digital tools such as Skype, Google Docs, and Trello, an organizing site.

Her approach is not unusual among solo businesses, according to Steve King, a partner at Emergent Research, a firm in Lafayette, Calif., that studies the independent workforce. A 2014 study by MBO Partners, to which King’s firm contributed, found that 38% of independent workers hired independent contractors in the past year, with most of these contractors doing the equivalent of a one-quarter time worker. Generally, says King, these “virtual” companies turn to contractors because they don’t have a consistent need for help, don’t want to manage employees, and want to stay agile.

Keep it lean. One thing that helped Krug grow her business quickly, she says, was her familiarity with the ideas of Eric Ries, author of The Lean Startup, and serial entrepreneur Steve Blank.

“It’s all about taking an idea—before you spend huge amounts of money and time bringing it to life—and doing cheap and easy iterations of it,” she says.

Using Kickstarter made this easier. By promoting her idea on the site, she quickly took the pulse of the marketplace. When more than 16,000 people responded by making pledges or placing pre-orders, she had her proof of concept—and a team of potential beta testers. Dozens of people who wanted to be distributors and partners also contacted her, she says, giving her confidence that the product had traction.

Expand your network. Krug didn’t know everyone she needed to create her product, but she wasn’t shy about asking people in her network for referrals—and then asking these new contacts for more intros until she found the help she needed. An industrial designer she found, for instance, was “a friend of a friend of a friend of a friend.”

Set one meaty goal a day. Krug sets one important task a day—like “Find an industrial designer”—to tackle first thing in the morning. That keeps her from getting distracted by tasks that don’t move the business forward in a meaningful way.

In a startup, says Krug, “There’s always more to get done. I think a lot of people abandon their vision because they feel so paralyzed by how much there is to do. They get stuck.”

She’s also built in a safety valve to prevent burnout. Once she completes her key task, she gives herself permission to take a break. “If I have energy to do more I will move onto the next goal,” she says. “There are some days where the one thing is so hard I’m depleted. I give myself permission to say ‘That was enough’ and pick up again the next day—again focusing on only one thing.”

TIME Startups

How the Cloud Is Helping Startups Grow Lightning-Fast

This company is teaching the cloud to see while using it to grow

In business, success is often about seeing the future. For instance, CamFind co-founders Brad Folkens and Dominik Mazur caught a glimpse of it in 2011, when they noticed search engine traffic on desktop computers was declining. Fewer people were using their PCs to look things up because they were running queries on their mobile devices instead.

As Folkens and Mazur looked deeper, they also saw how search habits differed on smartphones and tablets versus desktops. On desktops, people mostly use Google for whatever they’re looking for. But on mobile devices, if people want to find a restaurant, they’ll search with the Yelp app. If they’re looking for a work contact, they’ll use LinkedIn. For news, the New York Times app might be their go-to. And if they wanted to find out what spider just bit them, well, they were in some trouble.

“We found Google Goggles (a search engine that ran queries against photos) only answered queries correctly one in twenty times or at best one in ten times,” says Folkens, the CamFind’s CTO. “We looked at creating an image recognition platform that would output answers 100% of the time, with a varying degree of detail.”

Camfind’s image recognition platform works much differently than the kinds of search engines that came before it. Previously, when a search was run, the computer would show exact results, or nothing at all. But with some of the deep learning going on in cloud connected computing, CamFind can gradually come up with the right answer — in an instant.

For example, let’s return to the spider. Imagine you quickly snap a picture of the bug and use the image to search on CamFind. In the short time it takes to return the search result, the spider query spins out across the web. CamFind’s image recognition platform, a collection of code hosted on rented cloud servers, sends the query across other servers, also hosted in the cloud. The image file passes through a variety of computer vision algorithms: some specialize in two-dimensional images, others utilize deep learning technologies. If the image recognition platform still hasn’t figured out what kind of spider it is by then, the platform will send the picture off to a human in order to determine an answer. That person then enters the result back into the system, helping the platform learn the answer for a future query.

“Essentially what we have is like a brain that constantly learns as people take pictures with the app and as images are fed into our system,” says Folkens.

Most times, CamFind will identify the correct species of spider in the photo. (Spiders are actually one of CamFind’s specialties, probably because they freak people out so much.) “Then you can find out information about it, whether or not it is poisonous, and if should you go to a hospital,” says Folkens. Or, if the app is totally stumped, it will show the user enough results so they can recognize the spider in a related images.

But without cloud computing, CamFind would have arachnophobia just like the rest of us. The company would not only need a bunch of enormous computers in its offices to run these platforms and algorithms, but they’d also have to lease a massive space to house all that equipment. Through the capabilities provided by the cloud, CamFind can lease all the necessary computing power instead. This is a huge cost savings, and it’s at the heart of our current technological boom.

It used to be that when goods or services became popular overnight, they’d be victimized by their own success, unable to reach customers fast or inexpensively enough. They couldn’t get the tools they needed, build products quickly, or deliver their the goods in a timely manner to keep up with demand. But with the cloud, software startups can add (or subtract) computing might at the push of a button.

“The cloud makes that physical layer disappear,” says Folkens. “I can just say, ‘Give me five machines to run our computer vision algorithms over; give me 10 machines; give me a 100 machines all with powerful GPUs (Graphics Processing Unit) . . . and we only pay for what we use.”

As a result, within two weeks of reaching a million app downloads in late 2013, CamFind had more than 20 different companies looking to use the company’s technology in their own products. Today, they have more than 700 such customers using CamFind. This cool little app that was teaching the cloud to see has opened everyone’s eyes. The future is looking good, indeed.

TIME Transportation

Setback for Uber as South Korea Bans Private Taxis

The Uber Technologies Inc. application and logo are displayed on an Apple Inc. iPhone 5s and iPad Air in this arranged photograph in Washington, D.C., U.S., on Wednesday, March 5, 2014.
Andrew Harrer—Bloomberg via Getty Images The Uber Technologies Inc. application and logo are displayed on an Apple Inc. iPhone 5s and iPad Air in this arranged photograph in Washington, D.C., U.S., on Wednesday, March 5, 2014.

It's the first country to introduce a nationwide prohibition

In a largely symbolic move that appears to be aimed directly at Uber’s cheap UberX service, South Korea passed legislation on Friday banning unlicensed drivers from providing taxi services — becoming the first country to institute a nationwide prohibition of the practice.

According to Reuters, the bill is a blanket ban on private taxi services but lawmakers who pushed the bill did so citing UberX, a service that matches commuters with individuals using their personal cars as a taxi.

Uber already pulled UberX out of Seoul in March because of backlash from the taxi industry and local authorities. But the company still maintains a presence via UberTaxi (matching passengers with licensed drivers) and UberBLACK (which can be used by the disabled, elderly and foreigners).

[Reuters]

TIME Startups

Startup Founders Get their Rightful Place: On a Deck of Cards

Can you guess which late tech titan is the king of spades?

Running a startup is like playing a game of cards. Founders keep a sharp eye on competitors, and make the best of the hand they were dealt while mixing in secrecy, guessing, and bluffing.

So it’s only fitting that some of these tech company founders make it onto a deck of cards. New York City design firm Red Bean has started a crowdfunding campaign on Kickstarter to raise $3,500 to make the deck, “Startup Founder Playing Cards,” into reality.

The deck features iconic characters like Apple’s Steve Jobs (king of spades), the Huffington Post’s Arianna Huffington (queen of diamonds), Snapchat CEO Evan Spiegel (jack of clubs) and Jack Dorsey (jack of hearts) of Twitter and Square fame. But to find out the rest of the deck’s founders, you’ll have to fund the campaign.

Not surprisingly, this isn’t the first time Silicon Valley is lending itself to a game. Earlier this year, three friends created their own take on the popular board game Settlers of Catan that featured San Francisco’s startups that they funded through a crowdfunding campaign on Indiegogo. Last summer, San Francisco-based blog The Bold Italic, which has since shut down, had some fun creating would-be cards for Cards Against Humanity that lampooned Silicon Valley culture. To play Cards Against Humanity, players take turns playing a black master card with an incomplete statement or question. The rest of the players then attempt to play a clever response from their own hands of white cards.

As for Red Bean’s startup founder cards, they’ll cost you $15. Shipments are expected to start in August.

MONEY Startups

5 Creative Ways To Fund Your Small Business

man and woman in startup company having conversation
Getty Images

A look at the fast-evolving options for entrepreneurs on a money hunt—including several that first-time entrepreneurs tend to overlook.

When Mike Shapiro quit his job as a corporate lawyer to launch a group of community news web sites in 2008, he relied on savings he’d frugally socked away for years. “I wasn’t an Armani suit guy at my firm,” says Shapiro, CEO and publisher of TAPInto.net, a five-employee franchise chain, based in New Providence, N.J., that now has 37 locations.

But self-funding the business turned out to be stressful. During the first two and a half years, he poured about $250,000 into his startup, taking no salary while he and his family lived on their savings. And as he was launching the business, his son, then an infant, had to have open heart surgery, and his wife stayed home to care for the baby.

“I put all of my money into the company,” says Shapiro. “I had to work to bring in enough revenue so we could survive as a family. It was pretty high pressure.” And it didn’t help that he was launching the business while the global economy was collapsing.

So Shapiro took another approach in 2012, when he was looking for a $150,000 cash infusion. He raised the money in a transaction known as a private placement, selling equity in the business to supporters in the community who bought a stake in the company in $25,000 increments.

His efforts have paid off, enabling him to keep growing the business and invest in technology that keeps his sites visible. This year he projects that revenues at the profitable business will be in the range of $650,000 to $1 million.

As many entrepreneurs discover, raising money to fund a small business isn’t for the faint of heart. Only 46% of small firms received some or all of the financing they sought in 2014, according to a 10-state survey by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia. More than half of the applicants sought credit of $100,000 or less.

But fortunately, new options for small business owners on a money hunt are fast evolving. Here are five that first-time entrepreneurs often overlook.

1) Private placements

To raise the $150,000 he needed, Shapiro offered to sell equity directly to handpicked individuals on TAPInto’s advisory boards for various towns. “They were business and community leaders in those towns,” he says. That’s one way to do it, but it’s now possible to find such investors through online platforms, such as AngelList, CircleUp, and EquityNet, notes Richard Swart, crowdfunding and alternative finance researcher and scholar-in-residence in the Institute for Business and Social Impact at the University of California, Berkeley’s Haas School of Business. “There are dozens of platforms to connect entrepreneurs to accredited investors,” says Swart. When you do a private placement through these online platforms, it is called equity crowdfunding.

Pro: You can potentially raise millions this way.

Con: You will have to share ownership of the business with your investors who may not agree with how you are running it.

2) Community banks

It can be tough to win a bank loan, but given that banks generally offer the lowest interest rates on loans, they’re worth approaching. That’s especially true if you’ve logged a few years in business during which you showed steady growth and profitability—qualities that bankers want to see.

Even so, big banks can be tough to interest early on, so your best shot at finding a lender may be at a community bank. According to Biz2Credit, an online matchmaker between borrowers and lenders, lending approval rates at small banks were 49.6% in April, compared to 21.7% at big banks with more than $10 billion in assets.

“I would say between the two, if you have the option of going to a smaller bank, you should do that,” says Rohit Arora, CEO of Biz2Credit. “They are better in terms of approval. They understand your business better.”

When exploring your options, keep in mind that loans backed by the U.S. Small Business Administration aren’t your only option, and many entrepreneurs prefer standard bank loans that don’t come with a government guarantee. “SBA loans require a lot more paperwork,” says Arora. Capital One’s Spark Small Business Barometer, a survey released in May 2014 found that only 9% of small business owners have applied for SBA-guaranteed loans, even though 79% of respondents were aware of them. Among those who had applied, 73% said the process is somewhat or very complicated.

Pro: Banks generally offer the best interest rates—and you don’t have to give up equity to get a bank loan.

Con: It’s often hard to get a bank to lend to a startup.

3) Online financing sites

If you can’t qualify for a bank loan, check out the growing number of internet-based financing companies that offer short-term cash infusions via the web. “There are online funding platforms that can provide very substantial amounts of money, sometimes in the millions,” says Swart. These sources range from peer-to-peer lenders like Prosper and Lending Club, where individuals and institutional investors lend you money through the platform, to merchant cash advance providers, which offer an immediate cash infusion in exchange for a share of your future revenues.

Pro: What these platforms have in their favor is speed. They tend to approve or reject applicants quickly. “In the small business space, interest rate is one thing, but timing is important, too,” says Arora, CEO of Biz2Credit.

Con: The catch is that they’re usually not cheap. “Depending on what type of product you get, your APR can be anywhere from the low teens all the way to extremely high, probably 100% or 200%,” says Swart. The fine print on some alternative financing arrangements can be hard to understand, so if you’re not clear on what effective annual percentage rate you’re actually paying, ask your accountant before you sign any agreements.

4) Hedge funds, endowment funds, and family offices

In the past few years, these types of large investment pools have been looking for new ways to enhance their returns by lending to small businesses, says Arora. “These pools of money have never been available for small businesses,” he says. These lenders behave more like banks than online financing companies, and often are willing to make longer-term loans.

So how do you get access to their money? As a small business owner, you probably won’t get anywhere by cold-calling a hedge fund. But several online platforms such as Biz2Credit, Funding Circle, and Lending Club provide such loans.

Pros: Many entrepreneurs don’t know about this type of financing, so the pool of those competing for it hasn’t maxed out.

Cons: The interest rates can be higher than for bank loans. Typically, they range from 8% to 22% a year, says Arora. In comparison, the maximum interest rate for an SBA-backed back 7(a) loan—the kind used for working capital—is lower, currently ranging from 5.5% to 8%.

5) Third-party loan guarantees

With banks more eager to lend to small business but still using stringent lending criteria, third-party loan guarantees are becoming more popular in recent years, says attorney Andrew Sherman, a partner at Jones Day in Washington, D.C. who advises businesses of all sizes. In these deals, an entrepreneur teams up with private investor, known as an angel, to get a bank loan that the angel personally guarantees. In return for doing so, the angel gets equity in the business.

“The person that is picking up the equity is using their personal balance sheet to earn equity and not have to write a check,” says Sherman. “The bank gets more comfortable and gets to do the small business lending, and the entrepreneur gets access to the capital with minimal dilutions.”

Pro: Third-party loan guarantees can help you get a loan a bank might otherwise be leery of making.

Con: You have to give up an equity stake to get the loan.

READ NEXT: 5 Ways to Tackle the Problem That Kills One of Every Four Small Businesses

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