If you have an excellent idea for a new business but struggle to find ways to fund it, in this article you can find a few options that will surely help you in your new startup. We asked finance writer David Kindness from Paydaybears, a key figure in the financial sector for cash advance and personal finance, to give us, and you, his best tips to make your business idea become a reality.
1. Small Circle of Friends and Family
The apparent upside of borrowing money from friends and family is that it is way easier to receive the amount you need: they know you, probably want to help you, and can lend you money without dealing with a bank and its loans.
The downside, however, is that we are talking about human relationships. Borrowing money from friends or relatives can be risky and ruin those relationships. Pay attention to that, and ponder if it is worth it.
2. Small Business Loans
Banks are generally cautious when lending money to small startups, so it may be challenging to be eligible. Nonetheless, there are many lenders, online in particular, that could be willing to support you in starting your own firm. Pay attention, though, because these lending platforms may include exploitative measures. Make sure you understand who you are borrowing from.
3. Trade Equity
Think about this as an exchange. Do you have a neighbor who is fantastic at social media management and works as a freelancer? In the future, maybe you could “pay them back” by providing some marketing guidance. There are groups of aspiring company entrepreneurs that can cooperate in almost every city.
Coupled with point 1 we made before, this could turn out to be great so that your close circle of people is involved but still doesn’t have to rely entirely on their trust in you and on your newly founded business.
The negative? Being willing to trade equity is not universal since it might be a terrible way to make a livelihood. Don’t take it personally if your first pick denies your offer.
4. Bootstrapping
Bootstrapping is a business term that refers to the funding of a business made by the same person starting it. In other words, you finance the startup out of your own pocket. These funds might come from private savings, credit cards with low interest or no interest fees at all, equity loans, and/or mortgages.
Bootstrapping can be dangerous: if your startup fails, you will have a considerable debt you will have to manage somehow. In order to prevent a disaster, it could be helpful to calculate the interest rates you will pay on loans.
5. Crowdfunding
Crowdfunding is a magnificent opportunity to collect funds: you can share your project with the world, and if it attracts attention, it can generate a wave of support that is challenging to put into words. It sounds great, but there are downsides to this method as well. The biggest of all is that many businesses (indeed a lot) rely on crowdfunding platforms to receive support for their startups. In order to avoid getting lost in the ocean of ideas, yours really has to stand up and differentiate itself from the others.
Additionally, remember not to overcommit or present something to the people and your supporters that doesn’t represent your business idea’s reality. That can only bring problems.
Conclusion
These were just our top 5 pieces of advice in case you need to finance your project or business model. There are many more: you could participate in local contests or receive the grants offered by the Small Business Administration. Also, remember that if you have a job, keeping it is a good idea, as it is a way to avoid crumbling under the financial pressure funding a new startup can cause.