Having a business idea for a start-up or new business is appealing, but after that, what is next? The chances are you will need a website, office space, a team of professionals, and enough income to keep you going every month.
In a nutshell, you need money. It does not matter the kind or type of business you want to open; all businesses demand at least a particular percentage of funding to get the business idea off the ground in its early days.
As a policy-maker of BizFilings, many entrepreneurs come to me, asking for help finding funding for their start-ups. There are many places where one can get financing, and some are often overlooked. Therefore, if you are genuinely looking for start-up funding, this short guide will show you the way and the options that may be right for you.
Start With Bootstrapping
This is the first step taken by many entrepreneurs. ‘Bootstrapping’ simply means scraping together any personal funds you may have to finance your company. Generally, this includes credit cards, savings accounts, and even Qik car title loans or home equity methods.
Infarct, experts recommend using the money you have rather than the raising or borrowing approach. A majority of successful entrepreneurs continued to bootstrap until their ventures became successful. Bootstrapping is beneficial because it means that you will never have vast amounts of loans or monthly payments (expenses).
However, if you intend to scale the business faster, then you will benefit greatly from bringing in outside funding sources. In other words, what will happen when you run out of funds or decide you need more? Well, this will depend on the business type you are building. There are many places to find outside help and where you can start.
Consider Family And Friends
The truth is that asking family and friends for money seems like a tough thing to do. But, when it comes to seeking outside help, those closest to you should be the first to step in. Remember, it will not hurt you to ask. Even though your Aunt Florence is not in a station where she can finance the whole social network campaign for dog grooming, she may be in a position to toss you a couple of thousands.
Nonetheless, before requesting money from friends and family members, it is wise to have a business plan ready. It is only through a business plan you can explain into details what you plan to achieve, your charges, how you will make money, the gifts they will receive, or if they will get their money back (how much if so) and the amount of loan you want.
Exploring Funding Sources
If you are looking for a relatively small amount (ranging anywhere from $25 to $5,000), then you can benefit from several micro-loaning organizations like Accion and Kiva. These websites offer their services to low-income entrepreneurs based in the USA or those working for social goods. There are some give microloans to those living below the poverty line. If you think you can qualify, check out their respective websites for more data.
Crowdfunding websites are another great alternative that has continued to increase in popularity. Sites like IndieGoGo and Kickstarter offer entrepreneurs a platform to raise money from people and supporters. With these websites, you have to set up a campaign and targeted amount. For your campaign to be successful, you have to create bonuses for donors who pledge a certain amount of money.
The next step is raising money for the campaign and given a specific period. With websites like Kickstarter, you will only get to keep your money if you raise the full amount. Sites like IndieGoGo will let you keep any amount you raise (for a cut of the proceeds). To know more about this alternative, check out their websites.
What If You Want To Run A Small Business?
- Look Local
If you aim to run a small business, unlike a tech start-up like Facebook, you will defiantly benefit greatly through local small business development centers. Infarct, many companies have one, and SBA (Small Business Administration) has 63 of them across the country. These centers offer a lot like helping entrepreneurs connect with other groups of entrepreneurs, connect with investors, and even helping an entrepreneur determine the best loan and funding types that best fit them.
These local chambers of commerce can also be a treasure trove for guidance and information regarding places to get funding. A majority of large cities have programs and organizations that exist to help bring business into the local community.
- Taking A Loan
The moment you have proven that you have started gaining money and business traction, you can qualify for a traditional loan from a local bank. Banks like Wells Fargo and The Bank Of America have always announced their commitment to small businesses. Although every bank and person has different situations, this option is attractive only if you are looking for funding ranging between $5,000 to $500,000.
What If You Want To Launch A Tech Start-Up?
- Consider Looking For Angel Investors
Honestly, if you want to start a tech kind of business, you will eventually need more capital to get the business going. That is because you will need money for office space and for hiring people. As such, crowdfunding and bootstrapping options will not afford this venture. Your chances lie in reaching out to outside investors. Therefore, the best place to start for you is looking for angel investors who are established with a high net worth and willing to invest in promising companies. Generally, an angel investor will spend anywhere from $10,000 to a few million.
To find angel investors, start by asking other entrepreneurs in your network. You can also check the Angel Capital Association, which has over 330 angel investors across the nation. You can also decide to do through AngelList, which is a website designed to connect entrepreneurs with interested investors. Up-to-today, this website has helped more than 1,000 start-ups to get funded.
Sometimes angel investors host competition or events where they help provide entrepreneurs with additional opportunities to network. Check your local communities for such events and groups.
- Submit Into Bigger Capital
If you are looking for a serious investment of more than 1 million, then you should consider turning to venture capital (VC). When it comes to VC investment, you are more likely to need an airtight and well-into-detail business plan. VCs generally invest in few different companies for their clients and hoping to make money from one or all of them to pay back their client’s investment. What does this mean? Well, it merely means that they see all kinds of business ideas, and as such, you have to find a way to make yours stand out.
It is important to note that VC will always look for returns that are anywhere from 3 to 10 times the original investment, and usually within a specific period (within the next 5 to 7 years). For this reason, it is essential to have an exit strategy in mind.
The best way to get a meeting with VCs is through the introduction of other investors or entrepreneurs. If you decide to go through this route, it means that you have decided to solicit their money, and it is time to leverage your contacts and their networks to see what you can get. If you do not have any contacts worry not. You can try browsing the National Venture Capital Association website and pitch your business idea to the one you find a connection with. However, you should note that it is a gamble and not an easy feat to achieve, but offers high returns.
Are You Ready To Launch?
The truth is finding funds is the most challenging part of any business, but the most rewarding when the company sets off. Once you get the funding you need either from investors, loans, or savings, you can start your dream job. Remember, it can be a long road to success, but finding allies along the way is a great way to keep the business afloat and make a difference in the world. We wish you good luck.