12 options for funding your startup
So you’ve had an outstanding business idea, and you are ready to become an entrepreneur. You may have worked out the finer details of running the business you are passionate about, but before you can make your dreams come true, you need to consider how you will raise the finance to get started.
Here are 12 great funding ideas for you to consider:
This means using your savings or asking friends and family to loan you the money. This can be great if you want to start a small-scale business, and you will often find someone willing to invest. This route can be somewhat harder if you want to raise a lot of money, however, as individuals may not want to part with a great deal of cash. Make sure you don’t try to spread yourself too thinly if you decide to use your own savings. You will still need to pay the bills, and it may be a while before you can pay yourself a salary.
2. Selling assets
If you already have some assets, it may be possible to sell them to raise the funds you need. Many people remortgage their homes rather than sell them to get the funds they need. However, do remember that if you don’t keep up the payments on your mortgage, your home could be repossessed.
3. Bank loans
Many banks have specialist advisors who will look at your business plan and decide if the business seems stable enough for the bank to lend money to it. This can help you to fund the costs of buying equipment for your business or give you enough money to live on while you are turning your dreams into a reality. They will usually charge you a fixed rate of interest which is crucial as it will help you to budget.
4. Bank overdraft/Credit card
Your banking advisor may be able to offer you a bank account with an overdraft facility and even a company credit card. These are great options if you need to borrow a small amount and it will help your cash flow in the first few months of trading too. Just make sure that you can keep up minimum card payments as this can be an expensive form of borrowing.
If your bank has turned you down, microfinance providers may still be able to help you. These were set up to help small businesses get loans that they may not have been able to get elsewhere. This may be due to bad credit on the part of the entrepreneur, or there could be other reasons that a bank won’t lend to you.
6. Government grants
There are several government grants available, and this may help you to start your business. You will need to submit a business plan that will then be assessed by the grant committee. If they like your proposal, they will offer you some or all of the money you need. However, there is a fair degree of bureaucracy involved as these are government schemes. Don’t expect to receive the money quickly.
It is quite easy to organise crowdfunding in this day and age. You can pitch your business idea to a community of people online who are ready and willing to invest in the ideas they like. This can offer additional value as it can help to get people interested in your business. Free marketing and the money you need to start up is a win/win situation. The only downside is that there can be a great deal of competition from similar projects, so you have to make sure that your pitch stands out from the crowd.
8. Equity Crowdfunding
This is similar to crowdfunding. The difference is that instead of offering capital repayment, you offer an equity stake in your company instead. This can enable you to get noticed online too, and once you have investors, you will also have brand advocates who can be influential.
9. Angel Investment
Angel investors are people who have a great deal of money to invest in business ideas. You may have seen this type of funding strategy on Dragon’s Den. These investors can often act as mentors to the new entrepreneur as well as being able to provide the funding for start-up costs.
They often look for larger startup companies rather than the smaller ones so they might not be appropriate for your needs. Also, they will tend to want you to give up a sizeable percentage of your business and therefore overall control of it.
10. Venture capital companies
VCs are similar to Angel investors, but they are companies rather than individuals who would invest money into your new venture. They can be incredibly selective about who they work with, so make sure that your business plan is watertight before you approach them.
11. Business Incubators
If you are just starting up, then you may be able to apply for these funds. They nurture businesses, and they can also act as mentors if you need them to. It can be useful to work with incubators as they can help you to make business connections.
12. Business Accelerators
A mentor would invest money in your company and help you to accelerate its growth. You may be able to get further a lot faster if you borrow money from an Accelerator. However, as with Angels and VCs, they can make you feel as though you have lost control of the company.
Hopefully, this has given you some great ideas as to how to fund your new business idea. It can, of course, be good to use more than one of these at the same time as it allows you to diversify your funding sources. This can be invaluable in the first few months of trading. Whichever way you decide to fund your company, we wish you every success!