Funding is an issue for many small business owners. Whenever acquiring funds is mentioned it brings to mind an owner presenting his or her business plan in front of investors, the future of the business at stake, who proceed to sharp shoot the owner’s plan until he or she crumbles in tears. Micro-funding or Micro-lending however is not mentioned as often or brings anything to mind. I read a good blog by Michael Bowers regarding the importance of doing proper market research and having a solid business plan before asking investors for funds (http://networkedblogs.com/p0HLT). I agree, however when I think of this I think of LARGE AMOUNTS of funds, a loan with investors requiring shares and some control over the company. But what about a small amount? A micro amount? Let me give you an example.
You are starting your business, you are doing the basics, your website is up and going and you are looking to start a marketing campaign. You look at Facebook Pages for businesses. You have 10,000 friends on Facebook and figure that placing an ad here is a good way to start. You don’t need $1 million from investors to get your marketing campaign going. You don’t even need a $20,000 loan from a bank to get going. All you need is $800 to test your 2 month marketing campaign on Facebook ads. Where do you go?
Artists can go to Kickstarter (http://www.kickstarter.com/) to get their projects funded. Nonprofits can go to Kiva (http://www.kiva.org/) and get donors from around the world to fund operations. Small business owners in a high growth industry could look for Series A or Angel Investors in WeFunder (http://www.wefunder.me/). But what about a business owner looking for $1,000 or $2,000 to experiment with marketing or buy a small piece of equipment? Where do they turn? Surprisingly I have not found many places to go. Maybe I missed most of the sites but I spend most of my days doing research, so if there are multiple organizations out there doing this I honestly don’t know. But if there are sites for artists to get donations to do movies and paintings, if entrepreneurs in high growth industries have a venue, why can’t small business owners looking for small infusion of cash have one? I am not talking about massive funding; an Ad campaign for $100 or $200 for brochures, in other words a micro amount.
The key here is the SCOPE of the funding. There are sites out there, like Gust (Gust.com) who provide a venue for large investments. What we need is an outlet where a business owner that needs $1,500 to try that new saw table in his or her construction company could go to and be matched with an investor willing to lend that amount for a small return on investment.
Lending a small amount of money to a business does not seem like a wise idea right? If the business cant even produce enough positive cash flows to be able to buy a $1,500 piece of equipment then they must be in serious trouble right? Not exactly. Remember that these are very small businesses. It might be your your moonlighting neighbor, who has a website were he sells his woodwork and just needs that new piece of equipment to make better products. Or it might be your local ‘mom and pop’ trying to reach new clients but times are tough, they cant afford traditional marketing and need a little bit of extra cash to put together a bootstraps outreach campaign. Micro, not millions or billions of dollars in funding, is about giving those small ideas and businesses a boost so they can grow. How is fintech disrupting this area, if at all?