4 Ways to Finance Your Startup
If you have a great business idea but lack enough funding to get your startup off the ground, you are not alone. According to recent research, 90% of startups fail within the initial year, with lack of capital being a major contributing factor. Read on for four ways to raise money for your startup.
- Get a business loan
If you are looking to obtain financing for your start while retaining complete control of your business, you should consider applying for small business loans. Specific organizations, including banks, online lending companies, Small Business Administration (SBA), and Nonprofit microlenders, often offer loans to small businesses.
To improve your chances of getting a loan, ensure that you provide your startup’s financial projection, a business plan, and an expense sheet. These documents help you evaluate how much financing you should obtain while enabling the lenders to establish that they are making the right decision in granting a loan. Be sure to seek funding from various lenders, then compare offers to ensure that you get the best terms for your loan.
- Self-fund your startup
Self-funding involves using your financial resources to fund your startup company. Often, most lending companies will shy away from financing a startup that does not show traction or success. When this happens, you could use your savings or request your family and friends to help out. This is an easy way to obtain funding as there are fewer formalities involved. Your friends and family are also likely to charge lower interest rates.
Bootstrapping allows you to retain total control over your business. However, you will also solely take on all risks. Borrowing money from your family and friends can also hurt your relationships. When you tap into your retirement fund, you could ruin your chances of retiring early, not to mention facing costly penalties and charges.
- Seek government subsidies and grants
While securing a government grant or subsidy can be difficult, it is one of the best ways to finance your business as the grants do not have to be paid back. Government grants are offered to specific industries, including technology, health, and science. Some subsidies are solely awarded to women-owned businesses, while others are awarded to the minority groups to start their own entities. To obtain a government grant or support, you have to bring forward:
- A well-written project description
- A work plan with all expenses
- An outline of your startup’s benefits
- Details of your background and experience in critical areas of the project
- Filled application forms
- Find an angel investor
An angel investor is an individual, often an expert in a specific niche, who provides your company with the financing it requires to get off the ground. They will also offer you their management and technical knowledge, expertise, and networks to facilitate the success of your startup. However, you have to give up some control of your business as the angel investor will demand to be involved in major company decisions. You will also have to share your business’s profits with your angel investor.
Do not let your business be a startup failure statistic. Implement the above strategies to raise the financing you need to get your business up and running.