February 13, 2011

The cost of doing business isn’t cheap. One of the primary challenges for entrepreneurs is the effective management of cash flow. Small businesses generally lack the asset requirements necessary to qualify for bank loans. It is no surprise that small business lending isn’t what it used to be.

Big Ideas and Lean Pockets

Small businesses fail every year due to the mismanagement and lack of cash flow. While every entrepreneur has heard the adage that “Cash is King,” obtaining a quick injection of cash can be a daunting task. So, when I started my first company, I asked, “How can I master my funding without its mastering me?” Peer-to-peer lending, better known as crowdfunding, was a, seemingly, good answer. Alongside bootstrapping, crowdfunding is the perfect resource for fledgling entrepreneurs with big ideas and lean pockets.

Reward your Biggest Fans

The crowd is every entrepreneur’s biggest fan. People want to be a part of something bigger than themselves, and if you add profit or rewards to the mix, then you’re onto something. Crowdfunding enables your peers to minimize their risk and invest in business ventures they believe in. Gone are the days of pitching hundreds of venture capitalists or hoping that your local banker loves your widget idea as much as you do. One of the main reasons crowdfunding has become increasingly popular is that unlike working with traditional investors, you keep 100% ownership of your idea. Crowdfunding websites represent an excellent source of capital and offer a great platform to test market ideas and gauge consumer interest.

Focus and Fund

So, you’ve got a great project and need to fund it. What’s next? Create an account at one or more of the following crowdfunding websites. The catch is, make sure you are definitive about your project parameters. Projects such as “I am launching a clothing line,” won’t fly. The more precise the project, the better. Also, make conservative funding estimates (e.g. Do your homework). Projects that don’t reach full funding don’t get funded. Ultimately, your goal is to drive accountability with a definite start and end. While each crowdfunding platform varies in terms of allowable projects and pitches, they all represent a great starting point to help you focus your idea and fund your dream. Here are 3 websites that will get you on your way:

Profounder.com: Get started by following their step-by-step process to outline your pitch. Now it’s time to get creative and develop your investment terms. Profounder then creates the legally compliant documents and an individual website for your venture. Now, you can share your idea with the world; seek pledges and meet your fundraising goal.

Kickstarter.com: While causes and charities are not welcomed, creative and genius project ideas are. Post your project, set your deadline and capitalize on your network. If you’re looking for a hybrid of e-commerce and patronage support where you won’t have to pay back funds – ever, then Kickstarter.com is the best place to kick-start your project into gear.

Rockethub.com: Come up with a fantastic idea and sign-up for an account at RocketHub.com. Post your new project by following their 5-step process. Offer tangible rewards and kickbacks instead of monetary incentives and fuel your project within a predetermined time limit. Share it with friends, family and associates and spread the good news.

This article has also been featured on BusinessInsider.com.

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