Obtaining sufficient funding is an essential part of starting and growing your business. No matter how excellent your idea is, you’d still need to secure financing to make sure it comes to fruition.
You can start a business with your own capital or money borrowed from family or friends, raise your own funds by trading stocks, invest in real estate, or work with forex brokers for US clients. But if these aren’t an option for you, there are many ways you can obtain funding.
Continue reading to discover your options.
Crowdfunding allows entrepreneurs to raise funds for their startups using popular crowdfunding platforms where multiple donors can provide small amounts of money. This option also lets them promote their brand and services and generate awareness. Plus, it’s practically easy to do once you’ve had your business plan laid out.
To get started, set up a profile on crowdfunding sites like the following:
Since crowdfunding sites are a go-to option for startups, the landscape can be overly saturated, so it’s important to stand out. Make a great pitch, and be sure to show potential backers or donors what makes your idea unique and worth their money. And don’t forget to specify the amount of money you need to raise.
In addition to making potential donors interested in what you’re trying to do, you can also offer some reward, like one of your products or services or some other perk in exchange for their donation. Some startups would offer their donors a profit share or equity of their business. But if you’re not ready to share your profits yet, you can opt for a reward-based crowdfunding setup for now. Depending on how compelling your idea is and how rife the market is for your product, you can raise thousands of dollars with just crowdfunding alone.
Angel financing has become one of the most popular fundraising options for startups. This option involves angel investors or people who invest in early-stage startups in exchange for equity ownership. The most high-profile angel investor-backed companies include WhatsApp, Facebook, and Uber. The success stories of these companies have inspired many individuals to become angel investors with the hopes of getting incredible returns.
Angels typically invest between $25,000 and $100,000, but the number can go higher. To get on the good graces of angels, here’s what you need to have:
- Commitment, passion, integrity, among other important qualities of a founder
- Strong market drivers indicating your company’s potential to become successful
- A solid business plan and evidence that your plan is gaining momentum
- An appropriate valuation with reasonable terms
- Evidence that progress is being made to secure additional rounds of funding
- One-of-a-kind technology or intellectual property
There are different ways to find angel investors. These include:
- Venture capitalists and bankers
- Angel investor networks
- Crowdfunding sites
- Startup communities like angel.co
- Lawyers and accountants
- Serial entrepreneurs with a good track investing record
Venture capital firms are perhaps the most popular and familiar sources of startup funding. These firms provide capital and strategic assistance and contacts to potential partners, employees, customers, and much more. But this type of funding isn’t easy to obtain. Venture capitalists typically set higher standards for startups. They pursue the ones who are already showing traction and prefer markets with high growth potential.
To increase your chances of securing venture capital financing, here’s what you must do:
- Have a working product prototype
- Show early customer adoption
- Some form of brand awareness
- For early-stage startups, show traction and meaningful revenues
Keep in mind that VCs have other criteria, like where your company is based, what industry it’s in, and so on. Check out this detailed guide to securing venture capital financing for more information.
Small Business Loans
Many businesses started with help from a bank or financial institution. You can obtain financing from traditional and alternative sources like large commercial banks, peer-to-peer lending sites, local community banks, and direct online lenders.
You can use these loans to start up or grow your business, enhance your marketing and sales efforts, fund R&D, and expand into new markets. There are multiple types of small business loans available, each with its own terms, length, and requirements. Your options include:
- Working capital loans
- Accounts receivable financing
- Small business term loans
- SBA small business loans
- Small business line of credit
- Equipment loans
- Small business credit cards
Be sure to go over the lender’s terms and conditions to see if the small business loan makes sense for you. Pay attention to terms like the interest rate on the loan and how it can vary throughout the term, the loan repayment term and frequency, how the principal is amortized over the life of the loan, the limits on how the proceeds can be used, and what other costs are involved.
Securing funding for your startup isn’t easy, but it will pave the way for your future success.