There are only a rare few examples where starting a business from scratch is feasible. How to fund a startup business would become a hefty trouble of mind unless there is a strong financial support.
Usually, it requires a lot of sacrifice and a significant pool of finances that can cover your rocky lift-off. Thankfully, we live in the day and age when finding second and third-party finances has its own robust infrastructure, brought on by the proliferation of programs and digitalization of society.
If creative thinking and good business strategies are not enough to get you going, there are at least 7 amazing sources of startup funding nowadays.
Funding Sources for Your Startup Business
1. Love Money
“Love money” is a euphemism for squeezing the capital out of family and friends. Trust me anyone can raise startup capital if have nice relations with friends and relatives.
All joking aside, if you do not have sufficient finances to bootstrap, this is the second best method of gaining some economic ground without having to resort to time-consuming investor hunting. The additional benefit of this is that you do not have to relinquish any control of your startup to another individual or group of individuals unless there are some latent entrepreneurs among your friends who will want the piece of that cake.
Furthermore, such loans also leave the doors open for flexible timetables – typically, you can renegotiate dates of return, and this less-formal debt collecting can really take the pressure of you while you are trying to grow your business. The problem can arise even with this loan method if you borrow from a particularly unpleasant family member, but let’s assume that, if you plan to become a self-made businessman, you are a good judge of character.
Crowdfunding may just be the most convenient and flexible way to finance your business. Of course, partaking in such an enterprise does not come without its own set of rules and limitations. Most successful crowdfunding campaigns offer a carefully crafted set of rewards, repayments, and equity. It is not an ideal system, primarily because there are no guarantees for either side of the proverbial coin, but it can reap wonderful results if the mission statement is clear and the public is willing.
After all, if you pay attention to the success trends on platforms such as Kickstarter, IndieGoGo or GoFundMe, you will notice that only those individuals/groups that bent over backwards to create eye-catching presentations with consistent updates and fleshed-out motivations have found success with this method. Furthermore, there is the added bonus to this doctrine – if you create a captivating campaign, you will get an increased public interest in your startup. So, therefore, at the very least, you get free marketing should you play your cards right.
3. Angel Investors
Angel investors are typically defined as wealthy individuals that are eager to invest in your business idea in order to give you edge as the startup develops. The percentage of the overall budget you need that the angel investor loans can vary from individual to individual, but it is typically a number that can get you off the ground, especially if you rely on multiple investors.
These individuals can offer mentorship along with the capital, as many of them will typically be successful business people from the same area of industry in which you are trying to find your place. Furthermore, they will probably be ready to take more risks and be flexible for as long as they trust that you can deliver and, of course, expect a sizeable return once your startup hits the stratosphere.
4. Business Incubators
The idea of a business incubator (which is also known as accelerator) is embedded in the very name of the concept. These well-developed companies with sizeable premises will invite young businesses that show a lot of promise to occupy certain space within the company and offer the appropriate logistical, technical and administrative resources in order to nurture them. This is where the concept of the ‘incubator’ becomes an appropriate metaphor. The typical time span for an incubation period of your young and developing startup is roughly two years. Suffice to say, this sort of support is invaluable, especially because you gain access to an already established corporate infrastructure of the highest quality.
5. Credit Cards
It has been a widely accepted notion among misinformed individuals that credit cards are a bad strategy to fund your startup business, and yet you have probably heard that some savvy entrepreneurs rely on them for this exact purpose. So what gives? Is feasibility of startup funding through credit cards fact or fiction at the end of the day? Well, assets are hard to come by these days, so it was only a matter of time before independent businessmen found comprehensive (and comprehensible) ways to wield credit cards like sword masters in order to get their businesses up and running.
The bottom line is – you have to fulfill the minimum payment requirements. Certain business credit card applications will offer you 0% APR period which can last for a specific stretch of time – let’s say 12 months – so you can finance your business with interest-free calculus. Just make sure that you satisfy all your payments within the necessary time window in order to avoid unnecessary complications.
6. Venture Capital
Are you ready for the big leagues? There are many strategies to help you build a successful startup, but somewhere between angel investors and incubators lies the prospect of a venture capital fund, and this method brings it several notches up when it comes to responsibility and intensity. Venture capital funds are managed by the big sharks – seasoned professionals who have developed their own keen eye for companies with potential.
This is not about equity but a solid business investment with the accompanying mentorship and monitoring. The latter factor is quite important, as a venture capital will supervise and scrutinize every minuscule aspect of the process, making sure that the growth and sustainability of the startup become inevitable.
It is fairly intense patronage that can end abruptly and without any ‘personal feelings attached’. As soon as venture capital recovers the investment and profits, it will sail off in search of other prospects. The downside of this funding strategy is that you can lose control of your business as you relinquish most of the control to the venture capital investors.
7. Bank Loan
Finally, we get to the dreaded two words that have plagued the nightmares of countless entrepreneurs and employees alike – the bank loan. Of course, banking institutions have provided loans to entrepreneurs with reasonable business plans and some prerequisite conditions for centuries, and this hasn’t changed all that much in modern times. Most will look into other methods before finally falling back on this one and, funnily enough, bank loan typically ends up being one of the first places where the money-seekers go when considering business funding. You can take a working capital loan – where the leverage on the limit is determined by stocks and debtors, or you can fall back on funding.
Essentially, if you choose funding as your way to gain financial provisions from a bank, you will have to write up a project report in addition to the business plan. The problem with bank loans is, of course, high risk of collateral loss and a certain level of financial and contractual inflexibility, but everything can be managed with the right debt consolidation strategy.
Digital age gives you a range of tools that can lead to inventive methods of funding your startup. Unfortunately, it is quite easy to fumble your attempt at guerilla economics, and you can end up with a sizeable debt on your hands without a stable startup in sight.
The trick may be that you should seek out multiple sources of financing even if you get a major economic breakthrough with one loan.
Still, scavenging, bootstrapping and making ends meet is what creating a startup is all about. You just have to be daring enough to try new options, find inventive solutions, leverage convenient credit, create a thorough and comprehensible business plan and, of course, pick the right industry.
If you are absolutely sure that you know what you are doing with the proverbial product you want to sell, the money will come flowing.