Having a big, new business idea is great, but then what? Even if this new venture is not your first experience with entrepreneurship or a startup company, each situation will be unique and there is much to consider beyond simply the idea. Creating a business plan is going to help you streamline all your ideas, and the necessities to get yourself started. And you can expect funding to be a top line item, necessary to get the wheels in motion. The good news is that as startups are becoming more and more prevalent in today’s world, the opportunities for business owners are expanding as well.
As one of the oldest means of securing cash, bootstrapping refers to scraping together your personal funds to finance your business. This method can feel controversial because some would argue that the risk is too high, if your plan does not execute as hoped, and you have drained your personal finances, then what? However, bootstrapping can be utilized through a variety of methods, beyond simply taking money from your personal savings account.
Retirement funds, nest eggs, mortgage refinances, and life insurance policies are all great examples of ways that you can look to your own cash, to help you get your idea off the ground. You can look into cashing out your life insurance policy from this site here, and get an estimate that can help you get an idea of if that choice makes sense or not. Taking a little bit from multiple avenues is a way to take advantage of this method without feeling like you have depleted an entire source of your personal money and security.
Having conversations with your friends and family about your business idea, going over your plan with them, and exploring the opportunity to use them as investors is another way to piece together funding. Requesting cash from your inner circle might seem awkward or daunting but it can never hurt to ask, and through the process you might find a great business partner who shares your passion for the project. Your friends and family are going to know your integrity, financial habits, and work ethic more than an outside lender ever will. Securing funds from people who you do not have to convince about your character or ability to be responsible can remove some of the pressure that accompanies starting a business.
Utilizing personal contacts as a source of funding provides you with an opportunity to create some flexibility regarding repayment. While it is important to get the details on paper and create a plan that both sides are comfortable with, borrowing money from friends and family can mean lower, if not non-existent interest rates, flexible repayment periods, and an additional layer of support and confidence in your idea.
Depending on the amount of money that you need, you might be able to simply fundraise to come up with the cash that you need. Interactive opportunities and crowdfunding platforms are an innovative way for entrepreneurs to not only secure funds, but to also get their idea out into the world. Creating an opportunity for your community to support you via donations to your startup can create a customer base and loyalty to your product before you even open.
Different types of crowdfunding websites will have their own set of rules regarding timelines, perks for donors, as well as requirements regarding if you do or do not hit your target for total funds raised. Consider this option specifically if you are intending for your business to remain an online presence as opposed to a brick-and-mortar store. By sharing your idea, timeline, proposed products, etc. with the community you are creating a space for your idea so once you go live it is not the first time that people are hearing about your product or service.
Take Out a Loan
Perhaps the most well-known option to fund any type of large-scale venture is a bank loan. Looking to a lender to provide you with money that you do not have, but need up front, is a good way to secure large amounts of money that can be accessed quickly. As with all types of loans, small business loans will have their own unique set of requirements, interest rates, and payment plans, all of which can vary from lender to lender, so doing your research is beneficial.
If you can show that you have already started to gain traction for your startup, and that a loan will help amplify the success you are already experiencing, that is going to carry weight with lenders as well. Since these professionals do not know you as a person, and simply know you and your idea based off the black and white print on paper, having detailed evidence to assure them that you are a low-risk candidate is essential. Many large banks and lenders have recently pledged their commitment to the small business community which is another reason why your research can create greater opportunity for your business.
An angel investor is an individual, or small group of people, who have both expendable cash, and a specific interest in startup investing. These types of people can be a great option for entrepreneurs because not only do they provide the capital needed, often they also provide support and mentorship as you move through the process of a startup. There is typically an expectation of equity that pairs with their investment, so consider that as you learn more about this source of funding.
The amount of funding you require must be a top consideration when you investigate each opportunity. Angel investors, for example, traditionally invest lesser amounts than say, venture capitalists. Securing venture capital for your business is where you make the big bets. These funds are professionally managed and are typically reserved for companies that show an exceptional amount of potential. Venture capitalism is a space where you can explore the pros and cons regarding repayment. The leash is arguably shorter with a VC option and investors will want to recover their investment within a shorter time frame than some of the previously mentioned options.