Startup funding is a major headache for most people looking to be their own bosses. However, there are multiple ways through which you can finance your business. Read on to learn five of the best ways to fund your start-up.
Table of Contents
1. Get a Small Business Loan
Getting a small business loan for your startup allows you complete business control. To boost your chances of securing the loan, be ready with a business plan, five-year financial projections, and an expense sheet. This gives you a clear idea of how much to borrow and helps the lending institution know they’re making a great business choice by loaning you the money. Visit several financial institutions, get their offers, then compare and choose the one with the most favorable terms.
You can also opt for an unsecured business loan if you are looking for a loan without offering security. There are no guarantees or collateral needed for this loan, it requires less documentation, and the minimum qualification criteria aren’t too difficult to meet.
2. Friends and Family
Borrowing money from family and friends is one of the most common methods of funding a start-up. While it may be difficult to convince traditional lenders, your family and friends will most likely believe in your dreams, and they may be willing to fund your start-up. However, be careful if you decide to proceed this route, as you can easily lose friendships or sour family relationships.
3. Use Venture Capital From Investors
Venture capital investment is another great way to finance your first venture. It involves offering an active role and ownership share in exchange for the funds. While venture capital investments offer a longer investment horizon, it doesn’t grant you sole control over your business.
The standard procedure of finding venture capital involves finding a suitable investor and sharing your business plan. The investor then does a due diligence review, and if they’re interested in investing, the two of you can work on your terms and conditions. Upon agreeing, you get the investment.
4. Go the Bootstrapping Way
Bootstrapping is a common and good way to fund your business. It involves investing your own money to get the company running. The funds could be from your savings, nil/low-interest credit cards, or mortgages. You can get a free credit report card to assess your financial standing. With bootstrapping, you have complete business control. However, all the risks fall on you. Consult a financial advisor for insights to avoid ending up in a financial crisis.
5. Use Equity Crowdfunding
Equity crowdfunding involves getting small amounts of capital from a large group of people to fund a new business venture. You pitch your business idea to a network of investors and other persons willing to support your startup through crowdfunding platforms. Upon sharing your business plan and its growth potential, crowd funders publicly pledge and honor their support. You have total control over the business and unshared risk responsibility with crowdfunding.
Endnote
You may have a great business idea but no funds to actualize it. Consider the above ways to fund a startup and choose the most favorable one for your business.
