Starting any business will cost you a considerable amount of money. Unfortunately, not everyone has a trust fund or are independently wealthy. Most entrepreneurs are faced with the main challenging of getting funding to get their startups off the ground. Now their business may be involved with waterproof outdoor decking options or home automation but no matter how innovative or groundbreaking their business ideas are, they need funds to get it up and running.
Here are some of the most practical ways that entrepreneurs and budding business owners can generate funds for their startups:
1. Small Business Administration (SBA)
The backbone of any thriving economy is small to medium-sized businesses. The government is very supportive of SMEs because it benefits them if small enterprises are doing really well. As a result, the SBA offers several types of small business loans to help young entrepreneurs launch their startups.
2. Venture Capitalists
Venture capitalists are people who have money to invest in very promising businesses that have a high potential for growth and great returns. VCs typically are in search of equity shares in companies they invest in but since they also want to make sure their investments get good returns, they require to have a voice in the company’s direction and decision-making process.
3. Crowdfunding
Over the past few years, crowdfunding has enjoyed increasing popularity among entrepreneurs, investors, and the general public. Sites such as Kickstarter and Indiegogo have provided a lot of aspiring business owners funds to start their projects. Your needs and goals will help you determine which platform best suits you.
4. Angel Investors
Angel investors are also another great way of generating funds for startups. Companies like Yahoo and Google were all initially funded by angel investors. Typically, angel investors are individuals who keep their eye out for worthy businesses to invest in. At the very least, getting into business with an angel investor will require you to give them a share of equity in your company.
5. Personal Financing
All businesses involve some sort of risk on the owner. It doesn’t matter how lucrative it may seem, risks are a natural part of launching a business. In many cases, this risk level prevents lenders from granting loans to aspiring business owners. In these instances, personal savings or refinancing and taking out a second mortgage might come in handy if you’re willing to face the potential consequences.
6. Microloans
Microloans are typically reserved for nonprofit organizations. However, they can also be granted by institutions to deserving individuals that don’t qualify for traditional bank loans. Instead of giving the donation to a nonprofit org, they allow individuals to take advantage of economic opportunities and invest in them.
7. Product Pre-sales
If the startup business you’re launching revolves around the sales of a particular product, you can pre-sell it to help raise enough money to produce the product. A great advantage of product pre-sales is you raise enough money to produce just the right amount of products. This will help you avoid producing too much and having a warehouse full of unsold goods. Going down this route will be a bit more challenging, so you need to give this careful thought before taking the jump.
8. Purchase Order Financing
Purchase order financing is ideal for companies that deal in manufactured products — not services. A purchase order financing organization will extend an advance for the company to purchase their needed supplies and materials today and just collect payment for the loan once the items are sold.
9. Family and Friends
Your loved ones certainly want to see you succeed in your business endeavor. This desire might make them want to support you, even financially, just to see you reach your goals. Now, before you consider asking for money from your family and friends, you should fully understand the pros and cons of borrowing from your loved ones.
Many a relationship has been destroyed because of money so you need to give this a lot of thought before deciding to push through with it. If you think that it will cause dissension in the end, we strongly suggest not going through with it. Your relationships should never be compromised just because of money.
10. Contests
This one might be a bit of a surprise but, yes, some companies and organizations offer money and financing to individuals and businesses that join their contests. The eligibility requirements, criteria for judging, registration fees, and other details will vary depending on the company sponsoring the contest but if you have a good enough pitch, it might be worth a try.
Starting a business is never easy. From conceptualization to execution, it will be laden with challenges, the biggest of which will involve financing. Once you’ve taken care of this major concern, it will be a lot easier for you to get the other stuff done.
