Published on December 22nd, 2014 | by Millennium Magazine Staff0
6 Options for Financing Your Small Business Marketing Plan
By Caron_Beesley, Contributor, SBA
According to LegalZoom, small businesses spend up to 50 percent of their sales on introductory or marketing launch programs, while established businesses can spend up to 30 percent.
That may sound like a considerable chunk of change, but marketing is a must for small businesses – it gets you attention, helps build brand, generates demand and wins customers. But too often, marketing is seen as an unnecessary frivolity and is often the first cut from budgets when cash flow projections aren’t so healthy.
So how should you finance your small business marketing? If you can’t afford to allocate a sufficient slice of your sales revenue to fund your marketing strategy, you might consider financing it just as you would new equipment or inventory. Let’s take a look at your options.
If you’re starting up
Credit cards, crowd-funding and even friends and family are popular sources of financing for new businesses. Another popular option for new businesses is a line of credit.
A line of credit is a given amount of money you can borrow when you need it, and repay back when you don’t. Because you can draw on it when you need it, you can continue to finance your marketing strategy over time. Lines of credit can also be more advantageous to start-ups because you only have to pay interest on the money you use – if your credit line balance is zero one month – you pay nothing, much like a credit card.
Read more about your options in Marco Carbajo’s blog: Which Unsecured Business Lines of Credit are Best for Your Business?
If your business is established
A line of credit and the other funding sources mentioned above are still useful for established businesses, but as your business matures and becomes both profitable and cash-flow positive, you may want to consider obtaining a loan to finance your marketing.
One option is the SBA Microloan program. These loans range from $500 to $50,000 and are administered by microlenders (as opposed to traditional banks who won’t consider lending such small amounts). Microloans are well suited to start-up and smaller businesses such as retailers, restaurants, hair salons, and so on, that don’t have huge financing needs and may or may not have great credit. Inc.com offers a great explanation of the pros and cons of microloans.
If you need more funds, consider the SBA Express loan program. A subset of SBA’s flagship 7(a) loan program, SBA Express is designed for businesses with financing needs up to $350,000. The proceeds can be used to finance a variety of business activities and no collateral is required for loans up to $25,000 (although a business plan and strong business credit are essential). The application process is also more streamlined and benefits businesses who need easy access to funding – loans are usually reviewed and approved within 36 hours.
The bottom line
Marketing is an investment in future sales – whether you’re a freelancer in need of a new website to attract more clients or a retail store looking to generate more foot traffic. Don’t ignore it. If you’re not convinced, read these 10 Reasons You Can’t Afford Not to Market Your Small Business from the Udemy blog.
- How to Set a Marketing Budget that Fits your Business Goals and Provides a High Return on Investment
- How to Cut Your Marketing Budget and Build Your Brand Profitably