Funding Your Startup—Making Your Idea a Reality

Funding Your Startup

When starting a business, there are many challenges to overcome, and one of the biggest is financing. While you might have a brilliant idea, with the market research to back it up, you may not have the cash to actually push your idea into reality.

Just like there are various products, services, and ideas, there are also a number of different ways that you can get financing for your venture. If you’re currently considering funding, and don’t know where to start, take a look at some of the suggestions below to find one that works for both you and your business.

Bank Loan/Business Loan

This is a pretty traditional option, and one that many entrepreneurs look into first. While they can be a good way to get funding, they can also be difficult to apply for and receive, and sometimes require collateral.

Generally, a bank will want to ensure, as best they can, that the money will be repaid. That means that your credit, assets, debts, and other financial issues will be taken into account. It also means that they’ll want to see a business plan before giving you anything.

Government Grants and Loans

There are various grants and loans out there specifically for entrepreneurs. Some will be state-specific, and others will include all of the US. Since small businesses play such a big part in the economy, government organizations like the Small Business Administration (SBA) offer various types of funding for entrepreneurs and start-ups.

The types of financing will vary depending on where you need to expand. There are grants and loans specifically for research, and others that will be more general. The interest rates on loans such as these tend to be reasonable and easy to manage.

Angel Investors

Angel investors are usually retired entrepreneurs who want to give back to the new generation of small business by not only providing funds, but by also providing advice and suggestions based on their own experiences. Some angel investors join forces and form groups in order to have the ability to invest more money into the businesses that they want to finance.

Angel investors generally invest their own money, so they are sometimes limited in where they will invest. They need to be able to see a high return, and to see it fairly quickly. However, some studies have shown that businesses backed by angel investors are less likely to fail, since the investors are tried and true entrepreneurs, willing to steer the business in the right direction and offer advice when necessary.

They generally invest in return for shares in the company.

Venture Capitalists

Venture capitalists are firms that offer financing to small businesses in exchange for equity. They are typically referred to as Small Business Investment Companies (SBICs) and are similar to angel investors, but instead of investing their own money, they invest money on behalf of the firm and partners.

Crowdfunding

Crowdfunding is a fairly new and sometimes extremely successful way of funding your business. This is when, after entering your business information and goals on a crowdfunding website, individuals who are interested can invest any amount of money from their personal finances.

Anyone who wishes to donate funds may do so, and at virtually any amount. It’s unusual for them to receive any form of equity in return, but many start-ups that begin crowdfunding campaigns will offer small prizes or rewards that increase in value as the donation amounts grow, such as a completed product or company paraphernalia.

Friends and Family

Sometimes investments come from unlikely places, such as interested friends or family members. If you need funding, don’t be afraid to pitch your idea to people that you know. You may be surprised to find that some are looking to invest, or that some may want in on your idea.

The details in these types of loans are always based on your personal agreement with the investor. Perhaps they’ll want to enter into a loan agreement, or maybe they will invest in return for equity. They may just offer the funds as a gift to help get you started.

Selling Assets

If you’ve got assets already, such as land, or another business, you can consider selling them to glean capital for your new business. The less money that you borrow, the less that you will have to repay, which means more money in your pocket overall. If you have an inheritance, consider using that to give your idea the boost that it needs.

But, be careful with these types of endeavors. Most assets are long-term, and investing all of your resources into a business that may not be successful could leave you in a financially negative position later in life. Ensure that you are ready to use your assets to fund your business and that you understand the risks involved.

Contests

Another excellent way to gain capital for your business is to enter small business contests. These are usually divided by industry, so choose carefully. To win a contest you’ll need to have a business idea that beats out your competitors—preferably something either new or that improves on an old product or service.

Many small business contests are held each year, from things like Shark Tank to TechCrunch’s Disrupt. The prize amounts vary, but since many are given out by leaders within their industries, they also offer the possibility to connect with influencers within your areas of interest. These contacts can offer expertise, support, and sometimes more funding.

In Conclusion

Whatever you choose, be sure that you have a solid business plan and that you’ve done your research. The more prepared you are, and the more that you can prove the possibility of success, the more likely you are to get the funding that will allow you to turn your idea into a viable and lucrative venture.

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Brittany Foster

Marketing Writer at LawDepot
Brittany is an ardent reader, writer, and blogger.
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  1. Pingback: Impressing Investors: How to Pitch Your Startup - LawDepot Blog

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