How I Funded My Small Business


Different businesses need different kinds of financing.

Businesses whose major activity is trading could benefit the most common form of financing, a loan. Meanwhile, manufacturing business – especially the ones require heavy research and development – needs a different type of financing.

Here are some possibilities that you can pick out, starting from the easiest one:

1. Friends and Families

Advantages: Easy access

Disadvantages: Could potentially damage your close relationship

Friends and family is arguably the easiest source to tap into funding. However, borrowing money from this source is like handling a double-edged sword. If you are unable to manage their expectations and pay them back, it would potentially damage your relationship.

The best way to borrow from them is borrow just enough to kickstart your business, e.g. building a website, hiring a photographer for your first catalog, etc. and treat it as a high interest bridge fund with a maximum maturity of one year.

2. Credit Card

Advantages: Credit limit could be cashed in anytime

Disadvantages: Could lead to debt problem

Who would have thought that credit card is only for shopping? There are a number of ways to maximize your credit card limit, use it to fund your business.

However, the first thing to note is that not all type of businesses are suited for this kind of financing. Only businesses with a positive cashflow or a manufacturer with positive pre-orders can deal with this kind of risk.

For example, you need to give a down payment to close a good deal with a supplier but do not have enough cash. However, you are certain that you will receive payment in a week. You can first pay the supplier with credit card but pay it off as soon as you receive payment from the client.

Keep in mind not to max out your credit card, but only use it as the last resort. The fact is, this is an unsecured loan, so interest rates will be very high.

Never use that limit for consumptive purposes, because the last thing you want is to create liability. Your credit card is leverage to build assets, not liabilities.

3. Micro loans from the government (KUR)

Advantages: Facilitated by the government, so the process is quite easy

Disadvantages: Your business must generate positive cashflow in a couple of months or years, so it is more suitable for growth financing, not a start-up capital

Kredit Usaha Rakyat is a microfinance program initiated by the government in late 2007, which targets low-income families as part of the fight against poverty and high rates of unemployment. With that, the government aimed to boost small businesses and micro-economies, and distributed the loans through major national banks, i.e. BRI, Bank Mandiri, BNI, and BTN. 

The amount is vary, depending on each bank program.

However, to be eligible for this form of credit, your business must already be operational and generating positive cash flow.

4. Partnership

Advantages: Financing option without a liability of a debt

Disadvantages: Patience in building reputation and trust

It is true that money is the lifeblood for every business. However, no one said that it should be entirely your money. A common form of funding a business is by using "other people's money".

When you need injection of cash for your growing business, you can invite investors in exchange for equity. In other words, they will become minority stakeholders in your company. These kind of funding is called angel investment. 

You can get access to a lot of angel investment from a network like ANGIN (Angel Investment Network Indonesia) – a program initiated by the Global Entrepreneurship Program Indonesia (GEPI), or a website like AngelList.

5. Crowdfunding

Advantages: Getting source of funding without spending too much resources (other than time, ideas and energy)

Disadvantages: Not all products or campaigns are appealing for crowdfunding

Crowdfunding is a way to fund a project or venture by raising money from a large number of people via the internet. Today, crowdfunding itself has become a multi-billion dollar global industry.

Small-business owners can use this collaborative funding by choosing a crowdfunding site that is suitable for their business models. Some of the most popular ones are Kickstarter, Indiegogo, Crowdfunder, and GoFundMe.

Some local crowdfunding sites that you can try are  Wujudkan and Patungan Yuk.

Read more: Successful Online Businesses and How Much They Started with

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