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Launching a new business or scaling your startup can be very tasking, especially if you don’t have the financial backing you need. As an entrepreneur, it is priceless to recognize the best methods to get funds for your business idea or startup. Below are seven proven ways to get money to fund your startup or business idea:
#1. Apply for Grants
Grants are a viable financing option if you want to avoid going the bank loan route. Though they may offer you a different amount smaller than you’re looking for, there are many grants from state and national governments and private institutions. These grants are aimed at growing the economy and strengthening the job market, so there are good options to try when looking to fund your startup.
Grants can be very competitive, but getting one can help you save lots of money on staff training, IT and manufacturing equipment, premises, etc. You can access startup grants in the US via organizations like the National Association for the Self-Employed, Idea Cafe, and Small Business Innovation Research.
#2. Raise Funds Yourself
Another way to get funds for your business idea or startup is on your own. Many entrepreneurs are tough and would do their best to work for the funds they need. Some would keep their 9-5 job, while others would sell their possessions or do side hustles to gather cash and invest in their business. The major advantage of raising your startup cash yourself is that you have absolute control of everything and don’t have to bother about interest, investors. More than 90% of startups take off without loans or grants, so bootstrapping is possible. However, it could take a good amount of your time and focus from your business.
#3. Get Angel Investors
Angel investors are people who finance startups or viable business ideas for, say, 15-25% of your business. The thing with these high-net-worth individuals is that you need to convince them that your business is a worthy investment. Once they consider you a good fit, they’ll do proper legal documentation with your business. You will then agree to the terms and conditions of the legal agreement. The reason for those terms is to protect the investor in case your business idea doesn’t perform well.
#4. Family and Friends
Many entrepreneurs wouldn’t want to borrow from family and friends, yet it’s not out of place. It’s, in fact, one of the easiest ways to get funds for your startup with a very flexible repayment term and no interest. Depending on their relationship with you, some friends or family may even forfeit loans for you. But it’s worth noting that relying only on your social cycle for funds may not roll in significant amounts, so you must consider whether it’s worth it before taking that option.
#5. Crowdfunding
Through crowdfunding, you can get your business before millions of people and the funds you need from their contributions. It is a fast way of obtaining money for your new business, plus you don’t even have to be a tech guru to initiate a crowdfunding campaign. First, however, you need an irresistible pitch that proves your company’s growth potential and the zest to interact with the potential crowdfunding community. It is a hassle-free method of engaging the public with your company before it debuts. But it will require a convincing presentation to stand out in the crowdfunding space, especially in the initial stages.
#6. Small Business Loans
Although banks usually provide loans for businesses, they are very cautious when it comes to startups or small companies. As a result, the chances of qualification are low, so you can leverage alternative lending companies that can quickly help you get your business going. It’s essential, however, to get all the information you need about the lender or lending company. Also, review the terms and conditions of the loan so that predatory lenders don’t take advantage of you.
#7. Go for Venture Capital
A venture capitalist is a private investor who provides capital for promising businesses in exchange for equity or a percentage of your company. If you find a venture capitalist that believes in your business and shares your vision, you can raise enough funds to sustain your business. As you might imagine, you’d need a well-drafted business model that is easily scalable. That way, it will be easier for a venture capitalist to accept your proposal. Also,, bear in mind that venture capital funds usually have a short span, say 2-5 years, so it’s advisable to have a viable business plan that will materialize gainfully within that period.
Final Thoughts
The financing methods mentioned above are valid for any startup and worth considering by every budding entrepreneur. However, it all depends on the uniqueness of your business. For instance, family friends may work for one startup; crowdfunding may be the answer to another. Ultimately, it’s all about the financing option that best aligns with your business goals and can help you grow efficiently.
