Starting a business can be an expensive venture. Access to technology has made a lot of steps more affordable, and finding information practically free, but you still need to have money to make money, especially on a large scale. The first step to funding your new startup is to figure out how much money you will need to start and sustain through your first year. Once you’ve done that, here are some options for securing the funds you need.
The first place to look for funding is in your personal assets. Even if you don’t have a lot of capital or resources, you need to assess what you do have in order to apply for loans and explore other funding opportunities.
If you do have financial resources to invest in your business, you’ll want to make sure that you do so in the correct way. Talk to an accountant and a business lawyer about the best ways to allocate and distribute your funds to comply with your state’s laws. For free guidance, check out the small business association’s online resources. See if your city has an SBA representative who will meet with you and help you iron out a business plan and financial strategy. At the very least, they will have a list of local resources for you to explore, as well as information about the laws you’ll need to comply with.
As you’re analyzing your personal resources, you might consider refinancing your home or similarly leveraging other existing loans you have. This should be done with caution but can come with benefits like lower interest rates and a lump sum of cash you can utilize upfront. As with all financial decisions, you’ll want to read all the fine print and create a payoff plan with a plan b for if your business doesn’t take off immediately. Most businesses take a couple years to become self-sustaining, so don’t put yourself in debt that will overwhelm you when your business is going through growing pains. Be sure to analyze your marketing costs and touchpoints so that you have a measure for success in a year.
Depending on your financial situation, you may need to continue working for someone else while you get your business up and running. If this is the case, be sure to take intentional steps to make sure your growing business stays prioritized despite your day job.
Challenges and Contests
After utilizing your personal equity, you’ll want to look for grants, contests, and other sources of “free money” that you won’t have to pay back. There are ongoing programs, like FedEx’s Small Business Grant Contest, that annually gives money to qualifying entrepreneurs. You should also look for contests and grants aimed specifically for businesses in your field or for groups you fall into based on gender, ethnicity, or other demographics.
Once you’ve exhausted your personal resources and opportunities for free money, you’ll need to look at getting money from other people. If you have good credit and collateral, a bank loan is a straightforward option that could work.
If collateral isn’t available, look into equity financing. This basically promises a percentage of profits to an investor in exchange for an upfront sum of money. For you as a business owner, this is a great option because equity financing cannot be refunded if things fall through. Of course, finding investors with agreeable terms can be time consuming.
If you want to combine funding with advertising, crowdfunding is a great resource. You have to have an appealing idea that people will get behind and want to share with their friends. You’ll need to put together compelling copy and video content — but these are things that will be useful to your company moving forward anyway. Be sure to accurately describe timelines, starting and ongoing costs, and foreseeable setbacks. The more information people have, the more they’ll be able to get behind you as a company.
There are countless other strategies for securing business funding, like angel investing, venture capital, and more. In today’s connected world, finding resources is easier than ever. You must be careful that you’re finding reliable resources that will come through, but there are lots of affordable and accessible resources to help business owners like you find the funding they need to start the businesses that will lead us into tomorrow.