Let’s face it, one of the biggest things stopping people from following their start-up dreams is money; it can feel daunting and completely unattainable when you have no experience in developing or running a business.
However, there are many different ways of sourcing the financial backing you need to get a business of the ground.
If you already have a hefty amount of savings set aside, this could be the easiest way to get your business off the ground. Be sure to set aside enough to cover 12 months of necessary personal expenses; remember that going all in on a start-up can mean foregoing a weekly wage or salary for months, or even over a year.
Banks and Credit Unions:
To convince the above to loan you money, you will need a solid business plan to prove it’s worthwhile. You will also need a good credit rating to assure them that you’re a solid investment.
Try to find a bank that has an affiliation with or are familiar with you and/or your industry. Some in particular have assisting small-businesses in their company ethos.
You will most likely need some kind of capital behind you to begin with in order to show them you are serious about your business.
These are not always the simplest route for gaining financial backing, but if you have a top notch idea and the business plan to back it up, angel investors and venture capital firms can back you in exchange for equity in your business or partial ownership.
This kind of funding relies on others to donate their money if they think you have a worthy venture. It’s a virtual fundraising campaign that generally involves you putting forth your proposal (written or video), your target sum and an end date.
Crowdfunding does not always raise a large sum of money – although every little bit can count as a start-up – but some can really take off, especially if you have a killer idea that captures people’s attention; you might find your campaign raising more than you expected.
Sites such as Kickstarter and GoFundMe make it easy to set up a campaign and share it with family and friends, who can then share it with their wider network.
If you do your research, you’ll find there are all sort of grants available for those with a great business idea. Whether you are developing a female-owned business, are part of a minority group, or planning a simple start-up, there’s a chance you might be eligible for a funding grant. Look here, here here and here to get you started, and start applying for anything that might be applicable to you. Remember, the worst they can do is turn you down.
Family & Friends:
While it’s a common source of funding for a lot entrepreneurs, this situation can easily go sour. If you are going down that track, it’s important to be very clear with each other about the terms and conditions and put everything in writing. That way, further down the line, there is always a record of the original agreement. Remember, no bank will lend you money without some kind of agreement on re-payment and your family and friends should be no different.
If you’re all about jumping in head first you can try ‘pre-selling’. This involves pitching your product/service to a prospective backer before it is officially launched. If you can show them how their investment will be returned, they provide the monetary backing to get your product off the ground.
Entrepreneurial force, Lisa Messenger, is a huge fan of pre-selling. In fact, she consistently speaks about how she got backing for The Collective magazine before it was off the ground by asking for $300, 000 from her original backer (the Commonwealth Bank) in return for sponsorship and advertising within the magazine once it was in print.
Those shiny pieces of plastic can be easy but risky! If you are considering using credit cards as a way of paying for your start-up, be sure to do your research. Look for cards that have a low interest rate and decent terms.
Home Equity Loans:
If you have a decent amount of equity on your home, you could apply for a home equity loan. Generally this involves taking a lump sum from your equity and paying it back over time.
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