Funding and Marketing Tips for Growing a Mom and Pop Business


The National Mom and Pop Business Owners Day is on March 29th, celebrating small, independent businesses’ enormous contribution to the US economy. These establishments employ most Americans in the labor force but constantly face the toughest financial challenges. This guide answers some mom and pop business funding and marketing questions to help these type of businesses stay strong.

Many small business owners start their ventures already having a good idea of what to sell. It is usually a product that they have experienced manufacturing or marketing or a service type that a loved one used to offer. Regardless of how many “good business ideas” that the internet throws at them, they are still more likely to take on a familiar endeavor than a strange one to control risks early on.  

 

Mom and Pop Business Tips

 

Sound familiar?

So here, we go straight to the next step, which is usually what stalls mom and pop shop owners, and that is funding. You can make the most elaborate business plans, but they will never come to fruition with an inadequate budget. And once you get financial backing, the next thing to figure out is your marketing strategy—to have an effective one that will help you pay back a loan or return an investment.

These are the things that we hope to enlighten you about today. But before you start looking for a financing plan, you need to think about whether or not you are eligible for one.

 

What Are the Requirements for Successfully Getting Funding for Your Mom and Pop Business?

 

Statistics show that mom and pop businesses employ three out of five Americans and are less likely to lay them off during economic crises. These establishments face great financial difficulties but have limited access to funding or are not aware of all their options. That is understandable since many financial benefactors require thick documents, long waiting periods and enviable financial histories that not all people have.

Let us assure you this early that you can find someone out there willing to finance your business regardless of your credit score. You just need to look and be willing to meet their requirements. The most important prerequisites are:

 

1. Knowing the Amount of Funding You Need

 

How much money do you need and what do you need it for? Are you just starting operations? Is it for purchasing new equipment or manufacturing products? Or does the payroll budget just happen to be short?

Business owners will not want to risk all of their assets to keep them growing or have a safety net for emergencies. However, they are usually willing to manage the risks of temporary loans and other financing options. If the latter applies to you, then you need to work up the guts to get outside funding.

 

2. Knowing How Long You Can Afford to Wait for Funding

 

Funding approval can be fast or slow, depending on the source. Some take only a few minutes, while others can take months. You should assess the urgency of your need before applying for financing.

 

3. Your Tax Returns

 

Most lending institutions will assess your capacity to pay primarily through your tax returns. Income tax returns show how well-compensated you are at your current job. They are required for processing credit cards and personal loans. However, for business loans, your business tax returns are more important. They show the lending company if your establishment can pay credit that can reach a substantial amount.

 

4. Your Bank Statement

 

As Buffy the Vampire Slayer’s Willow Rosenberg would put it, banks would not give you money unless you could prove you had no need for it. And bank statements assure creditors that you have enough reserves to pay off the amount they loan you.

The amount that your bank account currently holds is not the only detail that cash lenders pay attention to. They also note the length of your relationship with your bank, deposit history and balance fluctuations.

Again, for business loans, the more important bank statements are those of your business, not your personal ones.

 

5. If You Have Collateral

 

Traditional moneylenders are more likely to let you borrow money if you can guarantee the loan with a valuable asset. You can put up any pricey property of yours as collateral—real estate, antique collections, vehicles, expensive jewelry and even your business assets. Home equity is when you put up your place of residence as collateral.

The main setback of secured loans is that the moneylender can seize your asset if you cannot pay back what you owe.

 

Collateral for Secured Loans

 

6. Your Credit Score

 

Your credit score is important to most moneylenders as it gives them an idea of how responsible you are when entrusted with a loan.

Creditors can loan millions to business owners with a good credit history and let them enjoy low interest rates and long payment periods. Meanwhile, other investors are willing to lend money to those with bad credit or without a credit history. However, the amount is limited to a few thousands or tens of thousands, and the terms may be less friendly.

Nevertheless, be assured that alternatives to loaning money are plenty. There are business financiers that give money away instead of lending it, and they do not need your credit score, bank statement or tax returns. You just need to meet other criteria or show your creativity.

 

7. Your Business Plan

 

Both traditional and non-traditional business financiers will need your business plan, which is the blueprint for your long-term marketing goals and strategies. For traditional business creditors, a solid business plan lets them know if a startup is creditworthy.

On the other hand, non-traditional funders may appreciate not only your vision but also how well you present it. The uniqueness of the product or service you’re selling may also help convince unorthodox investors.

You may get asked about the following aspects of your business:

  • Business model or setup
  • Location
  • Utilities
  • Rent or proof of ownership of your place of business
  • Insurance coverage
  • Incorporation documents
  • Identities of the incorporators
  • Raw material sourcing
  • Employee hiring
  • Licensing, etc.

It is best to get these documents ready and organized early on.

 

8. Proof of Seller History

 

Non-traditional lenders abound online, and if you’re doing business in cyberspace, they can get access to your online selling history. Not all of them require a good credit score, but they will judge your ability to pay in terms of your annual income reports, online sales volumes, customer reviews and other indicators.

These non-traditional creditors, otherwise known as “financial technology” or “fintech” lenders, generally have payment terms similar to those of traditional ones.

 

9. Your Willingness to Abide by the Funding Requirements

 

Some forms of business funding are given without repayment. They include grants and money won from business pitch contests. Although a few of them award hundreds of thousands of dollars, most entitle the recipients to much lower amounts. Nevertheless, if you want free money for your mom and pop business, you must be willing to satisfy these organizations’ funding criteria.

On the other hand, borrowed money is paid back depending on the terms agreed upon by you and the creditor. Some may require that the repayment is made in cash, with or without interest and within a certain time frame. Others may instead want to have a share in your company in return.

If growing your mom and pop business means seeking these investors’ help, you must be ready to comply with their rules. Of course, this does not mean that you are barred from exercising your ability to negotiate terms.

 

pitch and confidence in marketing skills

 

You can see from here that investors do not look for the same things. However, you need the grit to keep looking for the right financial backer and growing your business.

 

What Are the Different Funding Sources Available to Mom and Pop Businesses?

 

From old-fashioned to modern types, the following are the funding sources available to mom and pop business owners:

 

1. Traditional Business Creditors

 

This group of investors includes government agencies and privately owned financial institutions. Their loans have low interest rates, ranging between 2 and 13%, and the repayment period can take many years.

Business loan approval can take days to weeks, and these organizations require good credit history, taxation documents, and often, an asset for collateral. They can lend hundreds of thousands to millions, depending on your credit score and other proof of financial solvency.

To find out more about loans from traditional business creditors, you may check out these links:

 

2. Microloan Providers

 

Microloans are short-term loans of small amounts that can range from a few hundred to tens of thousands. Interest rates range from 5 to 20%. Lenders come from both the government and private sectors, with some even based online.

Approval periods can be fast or take weeks, depending on the creditor. Good credit history may or may not be required.

You may check out these links to compare different microloans:

 

3. Personal Loan Providers 

 

The lack of a business credit history may not qualify you for a business loan. However, you can always finance your mom and pop shop with a personal loan if you have a good personal credit score. Through this type of loan, you can avail of as much as $100,000, payable in a few years and with interest rates of 5-25%.

Traditional lending institutions offer personal loans. Evaluation is based on personal credit history, and collateral may be required. Processing can be done in a few days. The main drawback of this approach is that it does not help you build a business credit history.

You may visit any local bank to inquire about personal loans.

 

4. Home Equity and Other Collateral Loan Providers

 

Mortgaging a property or guaranteeing a loan using an asset as collateral is another financing option for mom and pop businesses. Through this type of financing, you can get as much as 80% of your property’s value. Secured loans are payable in 5-20 years and typically have low interest rates. Processing can take days to weeks, depending on the creditor.

Loans of this type will count toward your business credit score if you use business assets to secure a business loan.

Institutions known to have good home equity and other secured loan terms are Wells Fargo, Regions Bank and One Main Financial

 

5. Merchant Cash Advance

 

A merchant cash advance is a lump sum given in exchange for future credit or debit card sales. This is available to mom and pop businesses with immediate cash needs ranging from a few thousand to two million dollars in amount. Small regular payments are made, and the payment period is typically less than two years.

Collateral is not required, though proof of good business finances and credit score is. Interest rates are high, from 80-400%.

You may check out the following sites to know more about merchant cash advances:

 

Merchant Cash Advance

 

6. Business Lines of Credit

 

Financial institutions offer business lines of credit to help small businesses manage cash flows. On the one hand, they’re like business loans because of the required documentation. On the other, they resemble credit cards in that they are reusable, payable anytime, have a set limit and do not need a specific purpose.

The credit line maximum depends on your business credit history. Approval may take a few days. This type of loan helps earn business credit score points.

Wells Fargo, Headway Capital and Street Shares are some institutions known to offer good terms on their business credit lines.

 

7. Fintech Lenders

 

We have previously explained what fintech lenders are and what they require before loaning money. They have payment terms similar to those of traditional moneylenders. They can process applications within minutes, and most do not require collateral.

The following are links to the most reliable fintech credit companies:

 

8. Peer-to-Peer Lending Sites 

 

These sites connect mom and pop businesses to private financiers. The latter, also known as “crowd lenders,” invest their money this way as they expect higher earnings from businesses than deposit accounts. The website sets the payment terms.

Creditworthiness is assessed based on credit rating and other financial documents. The loan amount and interest rates are also determined from these credentials. Borrowers can get their total loan amount faster by splitting it into multiple, smaller requests. Processing rates and funding schedules depend on each platform and its investors.

For those without a significant credit history, Upstart is a good place to start. Meanwhile, the sites below can accommodate people with variable credit scores:

 

9. Grants

 

As previously mentioned, grants provide a way for you to get free money for your mom and pop business. They are non-repayable funds offered by government and privately-owned organizations. They can be as little as $500 and as large as several million, but the sponsors set very specific criteria for awarding the money.

Grants are limited in number, with some available only to certain sectors or industries. Consequently, applications tend to be very competitive. Processing may take days to weeks, depending on the sponsor.

You may check out these links to some grant sponsors’ websites:

 

10 . Crowdfunding Sites 

 

Crowdfunding, typically done online, is another way to get free money for your startup. You can do this either through dedicated crowdfunding websites or your own social media account. Here, you present your business plan on-site and raise funds from a large number of willing donors. You don’t have to pay the money back, although dedicated crowdfunding platforms may take a cut from your earnings.

Funding your mom and pop business this way can take weeks to months, depending on the amount you need, the platform you use and if your presentation attracts many donors. So a creative pitch will come in very handy.

You may check out the most commonly visited crowdfunding sites below:

 

Crowdfunding Sites

11. Business Pitch Competitions

 

As the name implies, these are showdowns among different startup owners as they pitch in front of several investors. Contestants are typically required to submit a pitch video alongside their application. Prizes can range from a few hundred to several thousand dollars and are awarded based on which spiels impress the investors the most. These contests are held in different states and happen throughout the year.

This is another way to get free money. Awarding times depend on the competition’s schedule. If it is part of a business event, you can get your money right after the contest.

The following are just some of the most popular websites for business pitch competitions. You can check them out for their schedules:

 

12. Angel Investors

 

Angel investors are people or organizations willing to fund startups in exchange for business shares or partnerships. They do not require cash repayment, and most do not expect immediate returns. Approval of your application can take weeks to months. A potentially high-selling product and a sound business plan are needed to attract these financial backers.

Here are some angel investor sites to check out:

 

13. Venture Capitalists

 

Venture capitalists are like angel investors. Instead of getting repaid in cash, they expect to have equity in your company. However, they need to see your business as one with high growth potential, as demonstrated by large initial demands for your product.

Here are some links to check out:

 

14. Selling or Pawning Assets

 

You can raise a small amount of cash from selling or pawning some of your valuables and extra stuff.

Holding a garage sale may help. Alternatively, you can sell some items through online ad posting sites like Craigslist and Facebook Marketplace.

In our blog, The Best Online Selling Sites for Beginners and Small Businesses, we also featured some e-marketplaces specializing in buying and reselling stuff. You can sell jewelry, antiques, electronics, designer clothing, books, CDs, etc. to these establishments. This is one way of getting some cash fast, as they can pay within 24 hours of appraising your item.

If you don’t want to let go of your valuables but still want cash for them, you can consider pawning them through establishments like USA Pawn and Pawn America. They will hold your valuables for a set period in exchange for cash but will keep them permanently if you cannot pay them back.

 

15. Friends and Family

 

Finally, if other options fail, you can always approach a well-off family member to loan you some money. There is no approval process, of course, but if the loan is quite big, you may need to sign a contract for the payment terms. Here is another chance for you to flash that smile and use your persuasive powers, all for growing your mom and pop business.

 

Asking Friends or Family for Loan

 

Consider each of these options and see which one you can manage best. All of them involve some kind of risk, but remember that risk is the street where resilient business owners live.

 

How Should You Market Your Mom and Pop Business After Getting Your Funding?

 

Mom and pop businesses may be small, but their edge lies in the personalized and cozy customer experience they provide. Here are a few techniques you can use for marketing your products:

 

1. Emphasize Your Unique Selling Proposition

 

Your unique selling proposition is what makes your merchandise stand out from the competition. Products can keep improving, but the customers will never know that unless you tell them. Failing to promote your unique selling proposition can spell disaster for your startup.

So if your seafood recipe is one made for royalty but priced competitively, make a catchy slogan about it and display it at your storefront.

 

2. Promote Your Brand

 

Branding is a marketing strategy that can help one in five US startups last for decades. It is not just made of the most obvious elements, like your logo colors, labels, and packaging, but also the quality of your products and services. Consistency is key when imprinting your brand in the customers’ minds. When shipping your products, use customizable packing materials rather than carriers’ branded freebies.

 

3. Provide Great Customer Service

 

Mom and pop business owners know the locals very well, which is why they can connect with them on a level that bigger retailers cannot. They remember their guests’ favorites and send personalized customer appreciation emails. They are willing to help potential buyers find products in their shops or make delivery convenient. It is easy for them to treat customers warmly, as they are more friends to them than just business clients.

 

 

4. Maximize the Power of the Internet

 

Digital marketing has become a force in recent years. And with mom and pop businesses’ local ties, its sales-boosting potential can become even greater.

The most successful digital marketing strategies are:

    • Blog and vlog posting
    • Email marketing
    • Influencer endorsements 
    • Online ads
    • Search engine optimization
    • Social media engagement
    • User-generated content, such as testimonies and event photos, that can elicit FOMO
    • Other content, such as webinars

You can use these tools to engage your target market, get to know it further and sell your products in both subtle and not-so-subtle ways.

 

5. Strengthen Local Ties Further

 

Bonding with the local community entails giving back to it. Here is another opportunity to make your business more visible than bigger retail joints. Some activities you can try are sponsoring local events, partnering up with other local businesses, offering freebies in crisis times and supporting local advocacies. Stronger community relationships can boost your sales in record time.

 

6. Make More Effort to Retain Customers

 

Lastly, keep in mind that customer retention strategies return more on your investment than moves to attract new customers. Take care of your community by listening to feedback, offering loyalty rewards, settling returns promptly and tactfully, etc. About 80% of your profit will come from repeat customers. You can woo new clients, but it’s your faithful ones that will help sustain your mom and pop business for a long time.

 

These mom and pop business funding and marketing tips are expert-recommended. Use them well, and they will get you paying back your sponsors in no time.

 

About Mom and Pop Business Funding

Mom and pop businesses are great contributors to the US economy, but they can suffer the greatest financial challenges throughout their lifespan. There are plenty of ways to help them improve cash flow, each requiring different things from the startup owner. Once funding is secured, they will also need support in promoting their brands.

In this blog, we provided financing and marketing guides for growing mom and pop businesses, and we hope that they will help you immensely. Always remember that resilient business owners thrive on risk and market proactively.

 

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