So, you have a great business idea? That’s no surprise, as start-ups are all the rage these days. They are driving innovation, entrepreneurism and a booming technology industry. But how do you get your business idea up and running after your lightbulb moment? You’ll need funding. Now, assuming you’re not already rich, this poses other questions – where, who or how will you fund your brilliant business idea? In this post, we will discuss six common ways that entrepreneurs use to fund their start-ups.
1. Venture capitalists
Ultimately, venture capital (VC) funds are the ideal source of funding for your start-up. But if you’re a first timer with this, be sure to do your research and understand the VC industry. It’s not easy to secure the funding and many first-time entrepreneurs become unstuck making the same mistakes. Securing VC financing takes exceptional knowledge and patience.
2. Small business grant
Check with your local government to see what, if any, grants are available for new small businesses and start-ups. For example, the Australian government currently provides start-ups and small to medium enterprises with matched funding of up to $50,000. However, this is to undertake research activities to help grow and develop their business.
3. Small business loan
Research banks that specifically offer loans for new small businesses. They may be few and far between as banks are known to be very wary of loaning money to a start-up, but it can’t hurt to ask. There are also alternative lending companies, but be careful with who you sign off with, as some might be predatory.
The crowdfunding industry is booming. In 2015 alone, the industry raised a whopping $34.4 billion! Popular sites like GoFundMe and Kickstarter have played host to many a successful start-up. If you’re particularly savvy with social media, then crowdfunding could be your best bet. But you must put the time and effort into your campaign for it to be a success, treating it like a part-time job. If everything works out, the payoff can be huge, especially if you have a particularly clever idea that resonates with people.
5. Credit card
All the other options on this list take a lot of time and effort. Using a credit card to fund your start-up takes very little, providing you already have the card or have been approved for one. And once you do, all the funding you need is right there in the palm of your hand. This frees up a lot of time for you to focus on your new business and working your day job, so you can pay off your credit card debt in instalments. It is also worth comparing different credit cards to find the best fit for your company. Remember, though, that you should think very carefully before racking up debt on a credit card, because interest rates are often high.
6. Family and friends
We put this option last because we like to think of it as a last resort. Although securing funding from family and friends can be much easier than from investors, it can be a rocky road to go down. As much as your family and friends believe in you and your dream, mixing these closest of relationships with money can be risky. Tread carefully and seek legal advice when taking money as a loan. As important as your business idea is, nothing is more important than family.
So, there you have it. Six ways to fund your start-up. There is no right or wrong way to fund your start-up. Heck, get the money any way you can, besides robbing a bank, that is. But whatever you do, do not give up. Try all the above or a combination of a few if need be. If you want your start-up dreams to come true and you put in the hard work, you will find opportunities will present themselves and doors will open for you. Best of luck!