Last Updated on Mar 13, 2020 by James W
There are a lot of potential business owners out there who have a great idea that could benefit their communities. The only problem is that many of them don’t have the financial means to get started. While owning your own business is a dream for many Americans, the lack of funds prevents many of those ideas from coming to fruition. As you can imagine, it doesn’t matter how great your idea is if you don’t have the necessary funds to make it come to life. The good news is that there are several ways in which you could go about getting the funds you need to start your business.
Choose Your Funding Option Wisely
Before jumping into the first offer that comes your way, it is imperative that you take the time to analyze several factors. Not only do you want to review your goals as it pertains to your business, but you must also review each type of funding source to determine which is best suited for you. Selecting the wrong option for funding could set you back financially causing your business to fail. After you’ve given some consideration to where you want your business to go, how much funding you’ll need, and how you plan to repay the funding source in the future, you can begin looking into options such as those described below:
- Crowd-funding
A new method for funding startup businesses is through a process called crowd-funding. Basically, you would create a campaign through a reputable crowd-funding vendor. The campaign should give a detailed description of what your business is all about , what your goals are, how you intend to make a profit, who your target audience is, how much money you need and why. From there, consumers are able to review the information you’ve posted and give donations if they support your idea or cause.
Things to Consider: If you’re considering the crowd-funding route, it is necessary to point out that it is a tough competition. There is no guarantee that consumers will be interested in your business, nor that they will donate to your campaign. You will need to work hard at creating a campaign that captures the attention of others.
- Venture Capitalist
A venture capitalist is essentially an investor or professional organization. These groups are exclusively interested in finding startups that need funding. This option is considered to be one of the more lucrative options as there is a great deal of money to be had as well as a plethora of resources (provided by the professional group choosing to fund your business) that can help you jumpstart your business.
Things to Consider: While this can be a great way to receive funds for your startup, there are some things you need to take into consideration. For example, most venture capitalists are looking for startups that have some type of funding already in place. They’re looking for businesses that are stable. It may also be necessary for you to give up a bit more control as it pertains to your company direction as most venture capitalists act as mentors of sorts.
- Angel Investors
Generally working in a smaller capacity than venture capitalists, angel investors can also be an effective solution for funding your startup. Unlike venture capitalists, angel investors generally allow you to retain control of your company.
Things to Consider: It is important to keep in mind however that angel investors are likely to want a significant portion of your startup. Percentages can get as high as 49% in some cases.
- Small Business Loans
Another option for funding your startup is by applying for a small business loan through a banking institution. They have varying options for you to choose from, and depending upon your credit (personal and or business credit), you can get approved. What must be kept in mind however is that most banks will require that you have a report that will clearly spell out how you intend to use the funds.
Things to Consider: New business owners may have a hard time securing an approval for a personal loan. Many lenders may view you as high risk. Since they aren’t fully aware of how well your business will do, lending out a substantial amount of money leaves the potential of non-payment on your end (should business fall through). In these instances, banks may also look to your personal credit history to determine whether you’re a credible borrower. To be on the safe side, it is best that you check your credit report prior to applying for any business loan. If you find that there are any discrepancies or inaccuracies on your credit history, you’ll need to look into reputable credit repair services to have the information corrected or removed. In this instance, it is important to check consumer credit repair reviews of companies like Lexington Law and others.
- Business Credit Cards
If your credit history is in pretty good shape, you may be able to apply for a line of credit that will help in funding your startup. Many credit card companies have specialized offers that cater directly to entrepreneurial consumers. You will need to review various credit card options and make a decision based on your business needs.
Things to Consider: Business credit cards can prove beneficial for funding your company, however, you must ensure that you’re able to repay in a timely fashion to avoid messing up your business credit. However, this is the most feasible option if you want to keep 100% control of your company as well as full ownership.
These five options for funding your startup all have advantages and disadvantages that should be taken into consideration before making a final decision. Many entrepreneurs have even utilized a combination of the above mentioned options to receive maximum funding for their startup. Remember, if you’re going to apply for a line of credit, checking your credit history prior is advised. Other than that, it is vitally important to follow through on your obligations in repaying the funds (if necessary) to prevent financial decline within your business.
