Starting a business can be a daunting task, and one of the biggest barriers is finding the funds to make it happen. If you have a great idea that you would like to get off the ground, here are a few pointers for getting the funds to launch.
Saving & Bootstrapping
Bootstrapping with your own money is probably the best way to launch a business if you have the means to do so and if it makes sense for the structure of your business. There are many reasons bootstrapping is ideal. First, it gives you full control of your business from the start. This means you keep all the equity and get to make decisions independently. The downside is you take on all the risk by using your own savings to fund the business. However, the downside is small compared to the upside if your business becomes successful.
Angel investors are great because they can provide larger sums of money without the typical restrictions of venture capital or bank loans. Angel investors are typically more flexible of the terms and can provide more personal support along the way.
Venture capital is a viable option if you need a large number of funds (usually over $1 million) to get started. Some businesses that require a lot of advanced equipment or brick and mortar locations are more expensive to start and usually pursue VC immediately. VC’s don’t typically provide smaller investments, so they’re not ideal if you have a low overhead business, as you end up giving away too much equity for funds that aren’t necessary. It’s better to start lean with your own money or with an angel investor if your business doesn’t require a ton of capital to get started. Only take what is required. There is a graveyard of businesses that took a bunch of VC, spent it on fancy office space and unnecessary expenses and went bust. Don’t be one of those. Play the long game. It’s better to go lean and steady.
It’s better to start lean with your own money or with an angel investor if your business doesn’t require a ton of capital to get started. Only take what is required. There is a graveyard of businesses that took a bunch of VC, spent it on fancy office space and unnecessary expenses and went bust. Don’t be one of those. Play the long game. It’s better to go lean and steady.
Sites like Kickstarter and GoFundMe are great ways of raising capital from friends, family, and pretty much anyone online. Many businesses have been funded through successful crowd funding campaigns, so you have nothing to lose by trying.
Friends & Family
Taking loans from friends and family is also an option. However, do this sparingly and be sure whoever you’re borrowing from is someone you know well and trust.
Peer To Peer Loans
Peer loans from sites like Prosper and Lending.com are also a great option if you have decent credit and are ok with higher interest. While these loans are more lenient and available, they do tend to have higher interest rates, so proceed with caution. However, they are a great option if you need funds fast and have been in business for less time.
Government loans are typically lower in interest, but can be a little more difficult to obtain. They also often require an existing business income, so they’re perhaps not the best option for startups, but some states do have programs that cater to startups. Go here to see what options are available.
Sell Your Belongings
You’d be amazed at how much you can make by selling off items around your house. With sites like Ebay, Craigslist, Poshmark and LetGo, you stand to make a nice chunk of cash by selling off your belongings. Besides, you can always buy more stuff once your business is successful. It’s a worthwhile, short term sacrifice.
Traditional Bank Loans
Bank loans are more difficult to obtain and require a lot more paperwork and assets, so they aren’t typically your best bet for startup funding. However, if you have assets you can borrow against such as a home you own or a fully paid off asset such as a boat or car, you can potentially borrow against its value. So, bank loans are a good option if you have assets to borrow against and good credit.