For a great number of new entrepreneurs’ their first priority in starting a business is funding. They want to know where they can get money, how much they can get and what the best deal is. A majority of the time funding should not be the first priority. There are much more important steps to take, including finding if you have a market and developing a team. At some point though, a situation might arise where your small business or startup needs funding. Michigan businesses will soon be seeing a new option.
There have been a number of recent developments in finding funding options. West Michigan has seen the birth of Start Garden, a $15,000,000 investment fund. The federal government recently passed the Jumpstart Our Business Startups Act (or JOBS Act) which will allow for crowd funding without previous restrictions by the SEC. Now the Michigan Office of Financial and Insurance Regulation could generate another potential source of capital for small businesses at a time when the state wants to build support networks for entrepreneurs and second-stage companies.
The August ruling by OFIR allows state-chartered credit unions now have the authority to invest in credit union service organizations, or CUSOs, that can make private equity and venture capital investments. Experts are estimating that things might be slow to get underway as credit unions implement new business plans on how this investing will work but suspect that 20-30 businesses will receive funding in the first year and things will progress from that point. Some believe that these investments will rival, if not exceed, those investments by private venture capitalists or angel investors. Most of the investments are suspected to go to second-stage companies.
More funding options are always good for small businesses and for the Michigan economy. West Michigan entrepreneurs still need to be cautious with pursuing funding. Most view funding as infusion of cash into their business to help it grow but in reality it is debt that they are taking on and can also cause their business to fail. Developing your business as much as you can without taking on debt is the best strategy. Even if that means the development is slower. Sometimes there is a need for that push that only cash can give you but having all of your options in front of you is vital to taking that plunge.
Source: “Credit unions get OK for equity, VC investing” by Mark Sanchez