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Realistic Ways To Fund Your Startup Business

Millennial Magazine- startup business

For most budding entrepreneurs with great business ideas, funding always seems a sticky situation, the difference between a realized dream and an abandoned business potential. You may have a great business idea, but your finances aren’t making your dreams a reality. How can you raise the money you need to get your business off the ground?

Don’t allow lack of capital to stall your entrepreneurial ambition. You need to create as many funding sources as possible, as you don’t want to put all your eggs in one basket. Here are a few methods you can use to fund your startup business. You can choose as many as can work for you.

Friends and family

If you have no funding for your startup, your friends and family are the first people you should turn to before anyone else. It may be harder to convince an investor or a financial institution about the potential of your business idea. Still, your family and friends can easily buy into your dream and be more willing to support it.

Your family (if they can) can support you with no strings attached. You can also go to friends you trust for a flexible loan. However, be sure to seek sound legal advice before you proceed to take a loan from someone to avoid future disagreements. Also, ensure that you’re both clear about the terms or conditions of payment to avoid misunderstandings in the future. 

Angel financing

Angel investors are people who invest in startup prospects or early-stage businesses in exchange for an equity ownership interest. Angel financing and startup investments have become a common way to fund companies, with shining examples like Facebook, Whatsapp, and Uber. Beyond capital investments, you can also benefit from coaching, depending on who chooses to fund your startup.

Unlike friends and family, angel investors are more professional. They pay attention to elements such as idea quality, the potential for growth, the entrepreneur’s passion, and the availability of a well-thought-through business plan, among other things. That is why writing a good business plan is essential to attracting the needed angel funding. 

Advance from a strategic partner or customer

Depending on the products or services you plan to offer, you can find a complementary business or a major customer who believes in what you offer and is ready to pay for your services in advance. Today, many successful companies started with the funding they received from their first major client that helped propel their businesses. Other variations of this theme worth considering are white-labeling or early licensing agreements. 

Business incubators

Business incubators, otherwise known as startup “accelerators,” focus on providing free resources like consulting, coaching, and even office facilities, among other things, to startup businesses. Some business incubators may also offer direct funding. Although many business incubators generally focus on supporting new business ideas in the high-tech sector, many local economic development programs or incubators pay attention to revitalization, job creation, and hosting and sharing services.

In most cases, the incubation support stage lasts for two up to years, giving new businesses and entrepreneurs the chance to test and grow their products or services. Once a business startup product or service is ready, they move from the incubator stage into industrial market production. 

Small business loans

Some banks and financial institutions specifically offer loans for small business startups. The difficulty here is that most of these loans come with not-so-comfortable terms and conditions. In addition, it can be pretty difficult to qualify for such loans.

Some banks also have special business loans for their customers with more flexible terms and conditions. So, you might want to inquire from your bank if they have such offers. If not, you can fall on lending companies, but you need to be sure of the conditions before signing any dotted lines, like most banks, lenders, and financial institutions are predatory.

Crowdfunding

If you want to stay away from all forms of financial institutions, and understandably so, crowdfunding is another alternative worth considering. With this option, you can raise funds through multiple funders through crowdfunding websites or other online platforms. Crowdfunding offers many budding entrepreneurs the opportunity to raise the capital they need for their businesses and even help them promote their services or products.

Another great thing about this option is that, unlike small business loans, it isn’t difficult to set up a crowdfunding account. All you have to do is find a crowdfunding website, create a profile, describe your business or company, indicate the amount of money you are trying to raise, and try to convince potential funders why they should support your course.

Anybody interested in what you’re trying to achieve with your business can donate to your campaign. In most cases, people donate in exchange for one form of reward or another. It could be a profit share in your business, equity, or some special discount on your products or services. 

Venture capital

An entrepreneur looking for financial support can also turn to a venture capital firm. A great thing about going for a venture capital firm is that beyond offering capital assistance, they can also provide labor resources, business partners, introduction to potential customers, strategic assistance, and so much more. 

However, one problem here is that most venture capital firms are more focused on startups that promise substantial potential opportunities with high growth returns. In many cases, getting venture capital assistance is not easy. Most venture capital firms also pay more attention to startups that already have working products or prototypes and have already been able to attract the interest of potential clients. Most will focus on specific areas or industries, and you need to have an impressive elevator pitch to gain their attention. 

Self funding

Today, more than 80% of startup businesses are self-funded, especially because the cost of setting up a company seems to be dropping. Unlike most of the options mentioned on this list, self-funding or bootstrapping might take a bit longer to save the money you need to fund your business, but it gives you the advantage of being in total control of your business. Your business remains yours alone, and you wouldn’t have to give up any control or equity.

What do you think?

Written by JD Heisenberg

JD Heisenberg is a writer/journalist for Millennial Magazine and other blog sites, covering stories relating to stocks, investments and Tech start-ups. When he is not researching the latest IPOs and corporate earnings, he is hiking the hills with Max, his loyal German Shepherd.

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