For those who wish to start a new business, finding the capital is usually the biggest challenge. Depending on your reason for starting a business, you might not necessarily have the money to get it off the ground.
In which case, you’ll have to find some creative ways to make your business ideas a reality. Fortunately, there are several ways to craft business budgets and secure funding that should get you on your feet.
Bank loans may be the most common source of financing. However, it can be quite difficult for new entrepreneurs to qualify. Banks usually prefer to loan their money when it is not high risk, mainly to businesses with a history of stability and profit and to people with a proven track record. And even if you do qualify, sometimes the conditions are more demanding than what you feel comfortable with agreeing to. However, it is not impossible.
Before applying for a personal loan or small business bank loan, shop around. All banks have their own pros and cons and offer different terms, interest rates, plans, and services. So make sure you know what you need and look for the best bank that can fulfill those requirements. You can compare banks online and find which would be best for getting a loan. Also, you will have to prepare a solid business plan and make sure you have a good credit score.
Funding raised through your personal network is usually referred to as love money. SpotLight Parking co-founder, Simon-Pierre Behr, suggest that you start with your network of family and friends and request for investments before going to VCs, incubators, and angels.
Focus on those who are closest to you and have some good money. This is because, these people are not looking for high returns, will not try to get involved in your operations and could spread the word within their own networks.
Monsoon CEO Sandeep Sood said that crowdfunding sites such as Indiegogo and Kickstarter can get you the support of thousands of investors. What’s more, is that these investors might not even be interested in acquiring equity in your company and are more likely to just fund you simply because they would love to get their hands on your products and services.
Lindsey Laurain, ezpz founder believe that Kickstarter is a great way to raise some capital, introduce your product to the market, get some feedback and gain good support. As a matter of fact, Kickstarter helped the company get the cash it needed to fund its first large scale production run and advance interest on its products.
Join an Incubator or Accelerator
Startup incubators or accelerators are all over the world but mainly concentrated in the US. They can usually give you from $20,000 – $120,000 cash or convertible debt for a tiny percentage of equity in your company.
Rick Morrison, CEO of Comprehend, said that being part of an incubator is a good way to learn about growing your business and approaching and pitching investors. The company took an investment from Y Combinator in 2011. And besides the 3-month program where you listen to insightful talks by established VCs and entrepreneurs, they also provide advice and perspective through the years.
These are experienced business people with a lot of time on their hands and money in their pockets who choose to invest in new businesses in exchange for equity. They are usually looking to invest in a business during the commercialization stage and their involvement in your business can later carry a lot of weight in the eyes of potential investors.
However, the success rate for companies who are seeking angel investments is only 5 percent. So, you need to be fully prepared when approaching an angel investor. They seek to multiply their investments 5 – 10 times to offset the high risks of startup financing so you will need to prepare for due diligence.
Small Business Competition / Shark Tank-Type Events
Nikki Hynek, CEO of Dollup Beauty, said that with the Shark Tank phenomenon getting more popular, more and more state organizations and local cities are hosting events that allow businesses to pitch to potential investors and receive some monetary prizes.
The company recently competed and won a total of $12,000 angel investment. Not only did they receive a monetary investment, but they were also connected with great investors that are willing to help their business grow.