If you have an idea for a new startup, you’re probably eager to get it off the ground. You’re going to need funding for it, though. Until you secure the capital you need, your idea will never come to fruition.
There are different ways you can secure startup funding. Here are five ideas that you can look into if you’re ready to put your plan into action.
Get Yourself a Business Loan
Getting highly accessible business loans is a matter of picking the right lending institution and convincing them you have a viable business plan. You can get a loan from:
- A bank
- A credit union
When you present your business plan, make sure that it’s detailed and backed up by research. You should study your niche and competitors so you can talk to the bank or credit union about market penetration.
You should have ideas for advertising, which might include social media platforms, radio spots, commercials, guest blog posting, appearing on podcasts, etc. You should also improve your credit score as much as possible before applying for the loan.
There are also crowdsourcing options, which is a less conventional way of getting business funding but is more popular these days than ever. Some crowdsourcing options include:
The idea behind any of them is basically the same. You’re putting your startup idea out there, and you’re relying on strangers to donate.
This sometimes works, but it’s hardly foolproof. If you have a genuinely original idea and a compelling story, you will have a much better chance of appealing to the masses.
In most cases, your project must get all of the funding you wanted before you can collect it. Keep in mind that the platform will also take a percentage of the money you make.
Borrow Money from a Friend or Relative
You also might approach a friend or relative if they have some money to help you. There are some significant positives about getting funding this way, but also some potential negatives of which you should be aware.
The conventional thinking is that if you borrow from a friend or family member who has money to spare, it’s easier than approaching a bank or credit union. It might not be as difficult to convince them as it would be some of those other lenders.
Your family member or friend might not charge you as much interest, or any interest at all. However, if the startup fails, then that money is gone, and they might resent you for it. If you can’t pay them back for many months, or even years, their anger about the situation can fester.
You’d better think long and carefully before you go this route.
Use Your House or Other Valuables as Collateral
You can head to a bank, credit union, or another lending institution, and if they don’t like your startup idea, they can turn you down. However, that’s less likely to happen if you can put something valuable up as collateral.
In many instances, that’s going to be a house or property that you own. If you own your home outright, for example, then that’s something you can put up as collateral if you want startup money.
Like borrowing money from family members, though, this move can backfire. You’d better be sure that you have a solid startup idea and that you can make it succeed if you put your house on the line. If your business goes belly up, you could find yourself homeless and destitute.
Court Some Investors
The other thing you can do is locate some investors who show interest in your idea. Maybe you can approach some venture capitalists. These are individuals or groups who put up seed money for startups if they feel like the concept is likely to succeed.
You might also look at your friends, family, or other acquaintances as startup investors. If you can get several of them interested, then you might have a shot that way.
It’s probably best to avoid familial ties with investors for the same reasons that it’s risky to borrow money from your family. If personal relationships mix with business ones, it can complicate matters.
Regardless of which method you choose, you have the best chance if you plan carefully and study the market before you enter it. Whatever niche you target, the competition is almost guaranteed to be stiff, and you’ll need creativity and fortitude to make your dream a reality.