Got a unique idea for a great business that’ll take over the world? Turn your ideas into reality with this guide on how to fund a startup business.
You’ve got an idea. You’ve got the passion. You’re ready to start your first business.
The only problem? You don’t have the funding. After all, starting a business costs money.
The question is: what do you do? How do you come up with the money to get the ball rolling?
There are several different options, all of which have their pros and their cons. Below, we’re going to discuss the most common of them. Without further ado, here’s how to fund a startup.
Pool Money With a Partner
One option is to start your business with a partner. By partnering up you can increase your amount of startup funds exponentially.
The downside to this method, of course, is that you will be sharing the business. Not only will you have to split profit but you’ll likely also have to relinquish some control.
However, if you’re okay with this arrangement, there’s no reason not to go for it. While having a business partner has its drawbacks, but it has quite a few upsides as well.
The most straightforward and cost-effective option is to save up money over time. This way, you’ll be able to start your business without a partner, and without having to make any interest payments.
The obvious drawback to saving is that it takes time. Depending on your level of disposable income, it can take anywhere from a few months to a few years. If you’re looking to start your business soon, saving up over time will only delay your ambitions.
However, if you’re comfortable with a transitional period, saving is actually a terrific option. It will allow you to start your business on a firm financial footing, ensuring that you don’t go into debt.
Ask Your Friends and Family for Money
Another option is to ask close friends and family for money, either as a donation or as a loan. By utilizing this method, you can start your business almost right away, all the while losing nothing (or very little) in the way of interest payments.
The problem, of course, is finding close friends and family who are willing to give you substantial sums of money. Most individuals don’t have thousands of dollars to cough up on something that brings them little benefit.
You should also note that asking your friends and family for money could result in personal problems down the road. This is particularly true if they’ve invested money in your company and it fails to live up to its hype.
If you have a large social network, you should consider crowdsourcing. Crowdsourcing is a method of obtaining money in which an entrepreneur advertises his or her business idea to the masses and asks for small amounts of money in order to fund it. The more people the crowdsourcing campaign reaches, the more money it will bring in.
Of course, crowdsourcing is far from a sure thing. Not only will you need a solid and viable business plan, but you will also need to be able to reach thousands of people, all of whom most donate at least a few bucks to your business.
That being said, if you can make it work, you can obtain substantial amounts of interest-free money.
Work With an Angel Investor
If your idea is especially groundbreaking or noble, you might be able to obtain funding from an angel investor. An angel investor is an affluent individual who invests in startups, usually because he or she believes in the idea.
Angel investors can be found in a number of different places. However, the easiest way to access them is to use an angel investor networking site. Angel.co, for instance, allows you to pitch your idea to a variety of angel investors without even leaving your home.
Target Venture Capitalists
If you’re looking to obtain a substantial amount of money, and if you’re looking to start your business quickly, you should consider targeting venture capitalists. These individuals make their living by investing in great business ideas. If you have a great and unique business idea, they might be interested in investing in it.
The downside to targeting venture capitalists for funding is that venture capitalists expect quick results. If you’re not able to deliver in a timely manner, your funding will be dropped, and you’ll be left in the lurch.
Obtain a Grant
A difficult but viable way of obtaining funding is to obtain a grant. Grants are essentially free money provided by public and private organizations. They have helped to kickstart a bevy of successful businesses, and could very well help to kickstart yours.
The issue with obtaining a grant, of course, is that it’s difficult. Grants have tons of competition, with only a select few businesses receiving them. Not to mention, their application processes can be tedious.
That being said, if you think you have a good business plan, you should start applying. Some of the organizations you should pursue when looking for grant money are the Street Shares Foundation and Small Business Innovation Research.
Take Out a Loan
If none of the above-reviewed options are available to you, you could take out a loan. The problem with taking out a loan, however, is that you’ll pay it back with an interest.
If you’re going to take out a loan to start your business, you’re advised to open a business line of credit. This type of loan works like a credit card, allowing you to take out as much money as you need over a designated period of time.
If you’re looking to take out a smaller sum of money, you might consider a personal loan. Personal loans such as the ones from CashNetUSA are easy and quick to obtain and can help to fund small expenditures as needed.
How to Fund a Startup Simplified!
Now that you know how to fund a startup, you might be looking for other business-related information. If so, you’re in the right place.
Our site is loaded with business articles, all of which can help you to fine-tune your business acumen. Be sure to keep reading.