Once you come up with a brilliant idea to start your business, one of the next steps to get your start-up off the ground involves securing financing. If you don’t have personal assets to use for funding, then you may need to find alternative ways to raise the capital your business needs to get rolling. Locating financing is a difficult and trying process. Below are five easy ways to get financing for your business.
Self-financing is the easiest way to obtain financing for your business. Commonly known as bootstrapping, self-financing requires pulling together capital from your personal savings or credit cards. You can consider tapping into your 401k or selling your personal assets to meet your financing needs.
In some cases, using self-financing may require you to cash in retirement accounts or borrow against your home for capital. This method of securing financing eliminates potential interest on loans and keeps monthly financing payments to a minimum. Self-financing also minimizes the time and effort spent locating angel investors or visiting traditional banks.
Ask Family and Friends
One of the easiest ways to obtain financing for your business is to look for help from family or friends. Whether your parents or best friends offer you a couple hundred or a couple of thousand dollars, this type of loan typically does not incur interest and people close to you are much easier to persuade than a traditional bank.
When seeking financing from a family member or friend, be sure to show them a formal business plan to explain how and when your business intends to pay the money back.
The internet offers a range of crowdfunding websites to raise money for your business. Crowdfunding includes donations from entrepreneurs, charities, or people who believe in your business. This platform requires your business to set a monetary goal to achieve over a specific period of time. Once the monetary goal is reached, your business receives the funding.
Be careful when using crowdfunding websites, as this platform requires your exact monetary goal is met to receive the funding. In most cases, crowdfunding requires some type of perk or incentive to get individuals to donate to your business. Here are a few popular crowdfunding websites:
Get A Loan
From SBA loans to personal loans, getting a loan from a bank requires a good credit history and a detailed business plan. Whether you require a small amount of financing or a large amount, a loan from a traditional bank can help to finance your business.
This type of loan may require some form of collateral such as your automobile or personal real estate to secure the loan. If your credit score is too low, a co-signer with a good credit score is required. Be careful with this type of financing, as a loan from a traditional bank carries an interest rate between 6 to 15 percent.
If you don’t have a rich uncle or ample personal assets, then locating an investor can help you obtain financing for your business. You can call the office of a potential investor to pitch your idea or you can attend investment conferences to improve your chances of finding an investor.
Investors are individuals with a high net income who believe in the success of your business. To locate an investor, you can network with other entrepreneurs or you can promote your business to organizations with ties to angel investors. Eyal Nachum has brought a list of organizations to contact for assistance with finding angel investors:
- Angel Capital Association
Obtaining financing can help get your business off the ground and helps your business stay afloat in times of financial hardship. The best way to secure financing for your business is to use a combination of methods to ensure you receive the capital you need to make your business successful.