how to fund a startup

Taking Care of Business: 10 Top Ideas for How to Fund a Startup

Business

When you have an amazing business idea, a solid plan for growth, and the dedication to make it happen, only one thing can stand in your way – lack funding. While this is truly the age of entrepreneurship, startup companies can’t get off the ground with good intentions alone. As the saying goes, you need to spend money to make money.

The question is how to fund a startup. Do you reach into your own pockets and use personal finances or seek help from outside sources. The truth is, entrepreneurship funds can come from anywhere and we’re here to help you sift through your options.

Keep reading for our top 10 ideas on how to get startup money for a business.

1. Boot-Strap It

If you’ve never heard of a bootstrap startup before, the term comes from the age-old notion of pulling one’s self up from the bootstraps. In this case, it means using your personal finances and resources for startup funding.

This includes digging into your savings and/or checking account, pulling from an inheritance or trust fund, etc. Boostrap businesses don’t rely on outside investors and even use their own finances to expand as the company becomes more successful.

2. Ask Friends and Family for Investment Funding

If you’re like 78 percent of other Americans, however, you’re stuck in a vicious cycle of living paycheck to paycheck. This means you likely won’t be able to find the necessary financing using your own resources.

In this case, learning how to fund a startup may mean appealing to the people closest to you to invest in your future company. This can be friends, family members, neighbors, and your current co-workers.

We recommend conducting thorough market research so you can present a legitimate business proposal to those you’re asking to invest in your company. Provide them with the details of your business and how you plan to be successful. This will give them more motivation to invest in you as well as provide peace of mind about how their investment will be used and repaid.

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3. Refinance Your Home

If you have a fair amount of equity built up into your home, you can also consider refinancing it and using the home’s equity as startup funding. However, understand that this can be risky and potentially create future financial strains.

However, when it comes to learning how to get startup funding, nothing is guaranteed. No matter what source you use, the money has to come from somewhere and you’ll be liable for paying it back.

4. Look Into Instant Cash Loans

If you don’t want to borrow against your home and don’t like the idea of borrowing money from your friends and family, you still have options. For smaller business ventures, consider using instant cash loans.

As their name suggests, these funds can be acquired quickly. Though they need to be repaid faster than typical business loans, these provide a great solution for people who need a smaller loan amount. They’re also attainable for those with poor or very little credit.

5. Increase Your Budget By Downsizing Your Personal Life

Depending on how much funding you need and how important it is for you to get your startup funded, you may be able to come up with the money by changing up your lifestyle. For example, you can start compiling money by selling off unnecessary possessions in your home such as extra televisions, recreational vehicles, sports equipment, electronics, and more.

To make an even bigger impact, you can take more dramatic steps such as downsizing to a smaller house with a smaller mortgage payment. You can also consider downgrading to an older vehicle and using the proceeds toward your startup.

6. Take Out a Small Business Loan

Learning how to fund a startup may mean taking out a traditional small business loan. This means getting approved by a bank or other lender. However, this often requires a high credit score and a detailed business plan.

The bank has to believe in you (and your credit history) as well as your business model.

7. Look to Angel Investors

When future business owners get denied for a traditional business loan, they often look to angel investors. These are private investors who help fund startups in exchange for ownership equity or convertible debt.

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You can find angel investors through the internet, social media, networking, etc. Just remember to make sure you’re fully aware of the terms and conditions of their investment.

8. Take Out a Line of Credit

Open lines of credit are another commonly used option for business owners. These are revolving loans that you can take money out of, repay, and take more money out.

These have a maximum amount depending on your credit score and whether or not it’s secured. Secured lines of credit typically grant more funds and lower interest rates.

9. Take on Business Partners With Deep Pockets

Learning how to fund a startup may mean compromising. In some cases, it may be wise to take on a business partner or silent business partner with the necessary funds to get your startup off the ground.

Their level of involvement will depend entirely on the individual and what you work out with them. They may choose to be heavily involved in the decision-making process or may simply sit on the sidelines and take a cut of your profits.

In either case, we highly recommend hiring a legal professional to create a legal contract between the two of you to prevent any issues in the future.

10. Start a Crowdfunding Campaign

Finally, you can look at the general public to help you fund your startup. Crowdfunding campaigns can be run through various platforms and networks.

People can pre-buy products or services, donate money, or invest to receive a reward of some kind. Some crowdfunding campaigns repay donors with small percentages of equity in the company.

Looking for More Tips on How to Fund a Startup or Improve Your Business?

If you have a fantastic business idea, don’t let something like lack of funding get in the way of your future. It may seem hopeless, but remember, there are plenty of options out there, you can learn how to fund a startup and get your business off the ground.

And if you’re looking for more business advice and tips, be sure to check out some of our other articles before you go!

If you’re a business owner and in need of resources, here are our top recommendations to set you up for success:

– Secure your business through worker’s comp insurance from Cerity

– Read about Why It Matters To Do What You Love 

– How to Grow Your Business During A Pandemic

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