It probably won’t come as a big surprise that one thing most entrepreneurs struggle with is finding the funding to launch. Sure, you have the big idea, the passion, the audience support—but without the financial backing, all of your plans are just theoretical.
If looking at the dollar amount you’ll need just stresses you out, it may help to know that there are many options when it comes to funding your business, no matter what your personal finances look like. From crowdfunding to angel investors, there’s an option for every entrepreneur. Here are 5 reliable ways to finance your startup.
1. Personal Funding
While this may not work in the long-term, some entrepreneurs find success funding the launch with their own money. This depends on your own financial resources of course, and if you don’t have enough saved to support your goals, it may not be an option. However, careful use of your savings (and an even more careful use of personal credit cards) can help you get started in the early, experimental days of your business.
2. Funding From Friends and Family
Maybe you don’t have the savings to fund your growth, but you may personally know someone who does. Inviting friends and family to support you can be a great way to move forward without the complications of other types of fundings—but it comes with some drawbacks. For example, you have to make sure the person in question understands that you might not be able to return their investment in the worst-case scenario. You should also make sure both of you are on the same page about their involvement in your business, if they’ll have any at all.
This is a wildly popular option nowadays, and it can be a lifesaver for entrepreneurs who don’t qualify for (or don’t want to take out) a bank loan. Through crowdfunding sites like IFundWomen, Indiegogo, Kickstarter, and Republic, you’ll be able to work with a pool of early investors who will fund your idea. You can choose from different types of crowdfunding, and you may need to offer rewards to attract investors.
4. Bank Loan
This, of course, is the most traditional option. Approaching your bank for a loan can be a great option for entrepreneurs with good credit, though you’ll need to keep in mind that the bank may want collateral to guarantee the loan. This option may be a good one if you also intend to work with the same financial institution for business credit cards, a checking account, and more. You may also want to consider SBA loans, which offer much lower interest rates and are more readily available for businesses needing funds during the pandemic.
5. Angel Investors
Angel investors are people who provide funding via private equity or venture capital for startups in exchange for something else, usually ownership equity. This option can be great if you’re looking for large sums of money, as the right investor may be prepared to spend anything from thousands to hundreds of thousands on a project.
Ultimately, whether you opt for personal funding or investment opportunities like crowdfunding is up to you. The way you obtain funding won’t necessarily make or break your business, but you should weigh the pros and cons of each option for your particular business to choose what makes the most sense for you. If you’re just easing into entrepreneurship, all of this may seem daunting, so don’t hesitate to check out our other posts for more of the helpful tips you need!