Funding sometimes is the single most important thing when it comes to developing a startup. Many entrepreneurs have a great idea but they fail to implement the same when there is a lack of capital. Taking a bank loan is how most startups fund their business in the initial stages but getting a loan is not always easy. There is an increase in competition when it comes to loans funded for small businesses and therefore many small entrepreneurs are often denied the necessary capital for their business. Therefore, more and more entrepreneurs are looking towards alternative forms of financing to take their idea off the ground. So if you are still trying to figure out what kind of alternative methods of financing you can explore, go through these six options:
Many famous startups got themselves off the ground through crowdfunding before getting huge investments from prominent investors. This is also one of the easiest ways to get a good amount of funding in a short time if you have a unique idea but commercially viable idea. The trick is to get more people on your side and therefore your idea needs to stand out and still be useful for the masses. Crowdfunding will not work if your startup is going to be about something that is already out in the market and there is no originality. There are many crowdfunding sites like Kickstarter and go fund me, where you just have to register and make a profile to get started.
- Get Help from Angel Investors
Angel investors are people who have a surplus amount of cash and are willing to invest in new and upcoming startups. They have helped many startups who grew up to be big multinational companies; one of the most prominent examples being Google which was funded by angel investors in its early years. The do expect a return of about 20 to 25 percent on their investment. An experienced angel investor can also help to give your startup a profitable direction. To get angel investors on your side, you will need three things—a good team, a profitable idea and a complete knowledge about how your startup is going to work.
- Funding Through Grants
If the startup you are planning is based on science or technology then funding through grants is a good option. Many government based organizations, NGOs and even some private organizations give grants to startups based on science or engineering. Some of the organizations like Small Business Innovation Research (SBIR) offer grants to small startups if they are in sync with the demands or targets of the federal research and also have a good scope for commercialization in the future. If you are thinking of taking grants as a serious funding method then you need to have the required knowledge and expertise. You should know how you are going to make your idea work when your startup is finally off the ground.
- Online Lending
Instead of going through the traditional business loan routine, try out seeking loans from online lenders. As a precautionary measure and to avoid further headache, get rid of any bad credit that you may have before applying for a loan through online vendors. Seeking loans from a verified online platform offers several benefits to entrepreneurs. The application form only takes an hour to complete most of the times and therefore, they can apply for loans faster. Also, the final approval will only take a few days and funds will be quickly transferred to your account. The whole process is very quick and simple as compared to applying for loans traditionally.
- Take Help of Business Incubators and Accelerators
Business Incubators and Accelerators offer programs that are available in almost every state and they help a number of startups get off the ground. Incubators help startups take baby steps and get them off the ground slowly while programs by accelerators believe in taking giant leaps to get make your startup profitable. Both incubators and accelerators have a similar goal—to fund startups and make them profitable. The only difference is how they work towards that goal and therefore you can choose either of them. Airbnb started with the help of accelerator called Y Combinator. Dropbox too used the same accelerator to get off the ground.
The important thing is to remember is that these programs can run up to eight months and therefore startup owners should be willing to invest their time and give their full commitment during the whole course. Networking and making good connections is another major advantage of getting funding from an incubator.
Bootstrapping is basically funding your own business and especially when it is your first time. For many people who are just starting out, getting investment can be a tricky thing as potential investors tend to be wary of people who don’t have enough experience. Self funding is a good option for an early stage funding before going to look for potential investors. It might not be the right choice for many startups, especially if they need the whole capital from day one itself. Consider the pros and cons before self funding your startup.
These were some alternative methods which entrepreneurs can try when they look for the necessary funding. If you have any other ideas then do not forget to comment.