Any person can have an idea or the desire to start their own business and dream to be able to make it some day on an entrepreneurial route.The dream looks so perfect as you can then be able to get out of your 9-5 job and be your own boss at your own business. However, in order to turn that dream into a reality is for you to start (most people don’t even start) and one of the obstacles that you would have to face is having enough capital or startup funds to actually launch the business.
Startup funds or capital is the money that is require for you start your business and it can come from variety of sources. You may have already plan out from A to Z on your business but the only thing that is in your way is the need to have that capital injection to kick-off your business.
So how can you acquire some funding enough to launch your startup? Some of the ways that you can explore are as below:
You can start dipping your way into your own pocket and see if anything that you have is sufficient to start your startup of yours. Most people would already have an experience working in regular jobs where you can gain stable income and save some money. They will then use their saved-up money to fund their business ideas. Most people would go for this option first before exploring other sources.
This is the type of funds that is most accessible to you where you can self-fund yourselves without relying on other people.
Side hustle or side income
Get involved in doing side hustle such as freelancing or any other gig that you can find to earn you some extra money. This micro business is actually one of the ways where you can earn extra while still working your regular job. With your savings and side hustle income, there should be some accumulated amount of money that you can capitalize to fund your startup.
Even if you think this is too much, almost similar to working multiple jobs, just perform the side hustle to a point where you already have enough to start your own business.
Friends and families
We all have families who support us and friends while we were growing up that we can rely on. You can turn to them and seek support with initial funding and if they are willing and believe in you and your startup, you can secure some amount to get you started already. The source of funding is closer to you than you think!
And many startup founders are using this method already. Take for example, Jack Ma, the founder of Alibaba, persuade 17 of his friends to invest in him and the rest was history. Elon Musk founded Zip2 with his brother, Kimbal Musk, using $28,000 of their father’s money and look where he is now. In 1995, Jeff Bezos’s parents invested $245,573 in Amazon and you know the rest.
Friends and families can be a great source but the business aspect of it including the risks must be outlined to manage expectations.
Personal loans for business
If you have a very strong personal credit score, you might be able to get a personal loan from the banks to jump start your business. That is, if you don’t mind putting your own finances on the line. Personal loan is considered a good option where they have lower interest rates and easier repayment terms than a business loan. Plus, you get to do whatever you want with the borrowed money.
However, do note that with a personal loan, you, the individual,are the one who is entering the contract with the lender and not your business.That is, if your business does not make it through, the individual is personally responsible to repay the outstanding balance.
Small business loan
Often times, people will refer to the bank and get the traditional loan to fund their business. It’s the most common route that people take, and you can take it too. Just be prepared with your business plan, your cash flow projection, your financial statements, your contract with clients (if any), your business details, and other relevant information, as those are what it usually takes to meet the bank’s requirement. It is just as an assurance to the lender, which is the bank, that your business has the chance to succeed and you will be able to pay them back what they loaned you.
There are also other alternative lenders out there that you can reach out to besides the banks. The US Small Business Administration (SBA) has collaborated with several lending partners to provide loans for small businesses in line with their SBA guidelines. It is through these lending partners that you can get the capital amount that you need, from any amount between$500 - $50,000, for your business.
Some of the lending partners that you can reach out to are:
Crowdfunding is another funding method that you could opt for. It is essentially raising capital through the collective effort of many individuals out there that is interested in your business and willing to invest. The investment might be small individually, but you could be getting it from a large pool of people. This can be done via social media or on crowdfunding platforms.
Example of crowdfunding platforms:
What you will do is just set up a profile on a crowdfunding website, provide your business description, and set the target amount of how much you are trying to raise. Those who interested will then invest in your startups and they will get rewarded with some perks or discounts on your products that you are selling. Or in some other way, they can also have some equity in your business in return depending on how you wish to set it.
Another benefit of crowdfunding is your products and your business will get the exposure to many people that is out there. Indirectly, it will help promote your products and reach out to potential customers.
Angel investors are wealthy individuals who are keen to invest in a startup that they think it’s worth investing for. They would do this in exchange of an equity ownership interest of the company and reap the benefits later when the startup is beginning to see success. It dates back to a few top companies that today we know such as Uber, Whatsapp and even Google. These are all successful stories of a startup that had angels investing in them at the early beginning. The amount that these angel investors would normally put is from a few thousand dollars to as high as a million dollars.
From another point of view, you can also benefit from angel investors not only from the funding standpoint but from the expertise and experience that these angels have. These angels are equally successful entrepreneur themselves and you can really seek advice on how to run your business better. They would probably have links to potential clients or even contacts to other strategic partners that may help your business in the long run.
There are websites that let you to find angel investors such as:
Other methods include networking with other business owners that is out there. You can find them on business community such as Global Leaders Organization or even you can reach out to them on social media such as Facebook, Twitter, and LinkedIn.
Venture capital is another source of funding you could get for your startup. It is basically funds that is managed professionally by venture capital firms with the sole intention to invest in startups and small businesses that have potential to grow. These firms can also provide other benefits such as strategic assistance, mentorship, and business networks, to name a few, that could be useful in your entrepreneurial progress.
So, if you have a solid business plan, a firm vision of your startup, together with full determination and desire to succeed in your startup, then that’s the gist of what it takes to convince venture capitalist to invest in your startup and you will be getting what you need to start already. Proceed with your pitch, VC firms will then evaluate your business based on credentials like pre-money valuation, marketing plan, business model and others before making their decision.
Do note as well that venture capital firms have their own focus investing in business of a certain industry. As such, try to understand whether their focus is aligned with your startup to get a better chance of being funded.
Small Business Grants
Another option for you to get funding for your startup is to look for government grants. Government grants are usually an incentive from the government to help small businesses get off the ground and grow their business.
Grant money is not a loan and you don’t have to pay back the money given to you. However, you have to qualify and meet the requirement of the grant and use it in a way that is intended to. Some grants are for you to use it for research purpose or training of your staff. Should you deviate from the purpose, the grant money may be voided, and you may have to pay back the money that was received.
You may find grants for your small business from these websites:
Startup accelerator programs can also be a funding option. These accelerators are usually a support system with a combination of funding, mentorship, networking, and educational that can be privately and publicly funded covering a range of different industries. One of the well-known accelerator programs would be the one by Y Combinator. We see a lot of big corporation today like AirBnb, Doordash, and Reddit are the products of these programs.
Usually it will last about 3-6 months with a demo day to end the program. A demo day is where you will pitch your business ideas to a room full of potential investors. It is really a good experience for any startup to join this accelerator program as it would not just provide you with funding but a whole experience vetting through your business idea. However, it is not easy to get accepted to this kind of program due to a large number of competitions from other startups.
Series funding is a concept where funding of a startup is done in stages. Normally, it will start off with the seed funding, then move onto Series A, B, C, D and E, depending on how many series needed.
When moving into one series from another, the focus of the funding will be different. To paint a picture, the seed funding is for you to start and to support the proof of concept or prototype of your business. Series A will then be funding to grow your revenue and support branding and marketing plan. Series B will later be the stage where you want to expand your business to greater number of people and need funding to increase production capacity.Series C might be funding for you to expand to other areas of the country. And it goes along until even to Series E if need be.
For more tools on funding, you may visit here.