You can’t exactly borrow startup money from your mom, right?
And it’s not the kind of thing you can solve by putting a few bucks in the bank account at the end of the month, not unless you always manage to put away thousands. Sure, you could sell your home or your car, but then you’d be homeless and carless, and it was a passing thought anyway – of course that’s insane. But damn, you’ve got such a good idea and you know it. You know you can turn things around for yourself, you know you could wow the world, you know you’ve got business sense, and creativity, and passion to build a great company.
If you just had enough money.
It’s all there — a solid business plan, enough drive and energy to last a lifetime, and a product that will bring something entirely new to the market. Is the lack of cash really the only thing that will keep you away from fulfilling your dreams?
Not if we can help it.
To get the funding you need, you could…
This can be a great idea or a terrible idea, depending on a few factors. Are you someone who has experience running a business, has already made a foolproof business plan, and has enough in cash in savings for a soft-landing cushion should the company fail? Then self-investment is a great idea. Are you still murky on the fine details of how your business will operate and have only barely enough in your savings to cover startup costs? Then it might be smart to consider other options.
2. Find a partner
If you share the passion, if you’re both ready to work hard, and if you trust this person professionally, then sharing the cost with a business partner is a great way to kick things off. Two heads can be better than one, but be careful — a business partner is someone who needs to share your vision completely. That’s why working with friends or family can be so tricky. Different personal habits, management styles, and disparities in skills tend to put a lot of strain not just on the business, but on your relationship as well. Be careful who you choose.
3. Find an angel investor
Angel investors look for companies that have growth potential, and they can give you all the capital you need to make your dream a reality. To draw them in you’ll need to create a flawless business plan and really sell them your idea. This can be tough, but it can also potentially provide just the kind of kick in the bum you need — instead of relying on passion alone, you’ll have to do your due diligence and really document all aspects of your business, make the necessary calculations, and have a strategic marketing plan in place.
4. Take out a good old-fashioned bank loan
The first thing to do if you want to obtain a bank loan is to review your credit history and credit score. You’ll need a credit score of about 700 to apply for a loan without issues, so work on improving your score if it’s too low. Banks will also demand to see a business plan before approving anything, so prepare in advance. You might have a better chance with small regional banks instead of big national banks. In fact, you can find a lot of innovative fintech lending solutions at alternative banks. These banks are startups themselves, and you can expect faster loan approvals, peer-to-peer lending options, and generally better loan conditions because these fintech firms are new on the market.
5. Take out an SBA loan
The Small Business Administration is a great place for entrepreneurs and startups. This US government agency not only issues loans, but offers a ton of classes and resources aimed at helping you start and manage your business. The SBA offers research and development classes that can teach you to tap into your potential for commercialization. It even gives grants to socially and economically disadvantaged persons, so make sure to check out the possibilities.
6. Try a business incubator
Business incubators are large companies that offer office space and resources to startups, and most of them are non-profit organizations. This means that you can get mentorship and office space free of charge, plus a large corporation to help you establish yourself in the business world. However, incubators rarely offer startup capital, so they’re not a great choice for companies that simply need money to get started.
8. Apply for debt financing or equity financing
Instead of taking a bank loan of $20,000 at 10% interest, you could sell a 25% stake in your business for the same amount of money. This means that when your company ends up making a profit you’ll have no debt to repay, but you will get to keep only 75% of your profits. This is called equity financing.
Debt financing means selling debt instruments to investors to raise money for capital. This means that in return for lending the money, your investors become creditors and receive a promise that the principal and interest on the debt will be repaid according to schedule once you’re up and running.
Which one you pick will depend on your business plan, your anticipated profits, and your level of comfort — maybe you don’t want to sell equity to just anyone, and prefer to rely on a straightforward bank loan.
9. Try crowdfunding
Kickstarter, iFundWomen, Indiegogo, Peerbackers — you name it. There’s a multitude of great crowdfunding platforms and they can all be used for business startups. If you’ve got a good idea and you’re ready to present your business plan to the crowd in a fun, eye-catching way, investors are bound to flock to you. A few bucks here and there, and soon you’ll have everything you need.
10. Try non-profit organizations
Non-profit organizations such as Kiva.org can help disadvantaged groups get funding. Kiva specifically offers no-interest loans to women and refugees, but you can also look into small business grants to get the money you need.
You get an idea, you make a business plan, you get financing, and then you start your company — it can be that easy. With so many options at your disposal, all you need to do is research them and pick the one that best suits your needs.