It’s the year 2017 and we’ve been living under the rules of capitalism for quite a while now. The defining question for everyone living under its banner is – how to get more money? This is especially true for young entrepreneurs and startup owners who are trying to breathe life into their ideas and fuel their business mechanisms. However, the question is difficult to answer, because we’re talking about a few thousand dollars, which makes the problem even larger in scale. You may have a business idea that seems revolutionary, but that won’t make people come and pour money in front of your feet.
So, what are the ways to get some funding for your startup? This is a guide for all those who are starting to raise capital for their businesses that have just come out of the incubator and need their “food” to grow.
1. Bank loans
The reality is that banks don’t give loans to startups that easily, even though it seems like the easiest and most logical way of acquiring funds. The main problem is they think that they won’t get their money back because of the possibility of a business going bankrupt. However, if you have some assets which can be liquidated and a good credit card history, there is a chance of convincing the bank to give you a loan, and that you can be trusted with their money. A good alternative to this is borrowing money from companies that specialize in giving loans, such as OnDeck.
2. Angel Investors
Who are angel investors? They are individuals with a keen interest to use their surplus cash to invest in startups. They can also work in groups to collectively screen funding proposals before investing. Many prominent companies, such as Yahoo and Google, have been helped to start up by angel investors. Angel investors prefer to take more risks in investment, but expect higher returns (expecting up to 30% equity). This funding option has its perks as well, because angel investors invest smaller amounts that venture capitalist.
Crowdfunding is a great funding choice both for people with a good track record and newcomers. It will work if you’re sure that there are people in a big need for your product or service. The most known crowdfunding platforms, such as Indiegogo and Kickstarter, are prime examples of crowdfunding websites where you can create your campaign.
People who like your idea and who believe that it might work can contribute their money, while you, as an entrepreneur, have to provide a detailed description of your business – how much funding you need, your business goals, the target audience, future financial strategies, and such. Those who give money make online pledges with the promise of giving a donation or pre-buying the product. However, you should keep in mind that hundreds of crowdfunding campaigns end up unfunded.
4. Personal Funds
Tapping into your personal funds to fund your business may not help you enough, it takes time and sweat, and won’t bring you loads of money, but those funds are at least entirely yours. There are no banks or investors who you need to answer to, or even trade a part of your company to. You’ll have complete control over your business with no outside obligations to anyone. How much you’ll be able to invest depends on your profession, personal abilities, and time. You have to spend less and work more, and it will be much easier if your work is well paid. If not, you’ll still be able to finance at least a part of your business from your personal savings.
5. Venture Capitalist
Venture capitalists give you money and you don’t need to return it. Instead, they’ll take the part of your equity and want to have an influence over important business decisions. What you must decide is whether giving away your business freedom for a lot of money is a good exchange. Venture capitalists can make things more difficult down the road, but they do provide more financial help than others.
However, if you have big plans for your business, then go for it, but still start your business ventures with smaller and more popular ways of financing it. If your business is destined to go large, find a venture capitalist, and grow.
In the end, one of the most popular and easiest ways to get funding for your business is to ask your friends and family for help. Be honest with them, show them your plans, show your passion and how serious you are, and be honest about the possibility of failure. They may never get their money back and they should know that.