Funding for Startups: 10 Ways to Raise Money to Get Your Business off the Ground
Dec 28, 2018 18:30
If you want to start a business you'll need money to get it going. Read on as we take a look at 10 great options for finding funding for startups.
Small business owners employ almost half of the private sector workforce. Are you looking to join the ranks of small business owners in America?
One of the biggest obstacles is coming up with the capital for financing your small business. But there's lots of funding for startups if you know where to look.
Read on as we take a look at 10 great options for finding funding for startups.
1. Self-Funding: AKA Bootstrapping
Known as bootstrapping, self-funding is putting together any funds you already have. This includes savings accounts and home-equity lines of credit. By bootstrapping, you avoid monthly loan payments by using funds you already have.
Do you have any assets you can sell? That's another way of raising startup money.
Bootstrapping can also include family and friends. Are friends willing to invest a little money into your project in the hopes of a good return? It can't hurt to ask. If your sales pitch is impressive, great Aunt Sally may give you a couple of thousand dollars.
You might not need to go farther than close family and a friend or two for enough funds to get your idea off the ground.
2. Angel Investors
Angel investors are outside investors. Tech startups need office space, a business website, computers, and employees. That often requires more cash than you can muster when bootstrapping.
Do some networking. Get the word out that you're looking for investors. Ask other entrepreneurs for introductions to angel investors.
Take a look at AngelList and Angel Capital Association. Angel Capital Association has hundreds of investor groups across the nation. AngelList connects you with other investors.
3. Venture Capital
Venture capitalists invest on a much larger scale. If you're looking for a million dollars or more, look to venture capital. But before you seek out a venture capitalist (VC), put together a serious business plan.
VCs expect a return on their money at the rate of 3 to 10 times their initial investment. They want this within about five years.
Tap your existing connections for an introduction to a VC. Don't have any good contacts who know one? Time for cold calling, which isn't as easy, but can be beneficial.
Also, check out the National Venture Capital Association. Be prepared to answer tough, in-depth, and incisive questions about your startup.
Go straight to the crowd through the Internet for crowdfunding. The web is a good source of financing. Do you have a great back story? That's key when asking people for money.
Use video when telling your story. Let people know how hard you're working and how much you've contributed. Offer a small perk, like a free sample of the product, when donors pledge.
Platforms such as Kickstarter raise funds from individuals. The donations are often small. But get enough small donations and you're in business. Kickstarter began in 2009. Since then, there have been over 155,000 successfully funded projects.
If you use a crowdfunding platform, know the rules. Each platform is different. On some platforms, if you don't meet your goal within a specified period of time, the money gets returned to the donors.
When funding for startups, crowdfunding can be a great way to go. Remember that funding platforms also take a percentage of the funds raised.
5. Accelerators and Incubators
A business incubator nurtures a business through mentorship programs offered by the investor. If you're new to running a business but have a great idea, an incubator is a good choice.
You'll fill out a detailed application. You'll need to show a high likelihood of success for the business, and there's a lot of competition for spots.
An accelerator puts your business on a fast track to success. Most major cities worldwide have both accelerator and incubator business programs.
Look for small business associations in your city for more information.
6. Credit Cards
Are you over 18? Do you have a consistent source of income? A business credit card is an instant source of funds. Credit cards Canada instant approval is an example of an instant approval process.
Be sure and follow the advice on the website when comparing credit cards. Experts guide you toward the card that suits you best. Some cards offer cash back that could help with further funding down the road.
The Small Business Association (SBA) in the U.S. matches you with companies providing microloans. They're loans of $50,000 or less. The loans aren't coming from the SBA itself, but they set the guidelines.
They're used as capital for the business. Or use the loan for equipment and supplies. If you're starting a small store, the money can also be used for inventory.
You can't use the loan for payment of already existing debt. You can't buy real estate with the loans.
The payback time is six years or less. The loans come with counseling and education for help running your business.
8. Traditional Bank Loans
Try a traditional bank loan. You'll need an airtight business plan. Outline everything from how the company operates to the forecast for profit. A bank officer wants the estimated time in which the company will make a profit.
Contests are tough and there's a lot of competition. But, if you've got a great idea and know how to pitch it, try a few contests. Shark Tank is a popular television show that has contestants pitching ideas in the hopes of obtaining angel funding.
If you're producing a single product, try product presales. Sell the product online and when you've got enough orders, make and deliver the product.
A great way is to offer the product through credit-card only. Don't charge the customer's card until the product is ready to ship. If you don't get enough orders, tell the customers you won't be sending the product. You also won't charge them.
Funding for Startups
Funding for startups takes perseverance and hard work. But it's worth it if you've got a great idea.
From angel investors to traditional bank loans, these are 10 ideas to get you going. Write out a detailed business plan before you pitch your idea.
Decide how much money you need. Then figure out the types of funding that'll work best for your startup needs.
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