Do you have a business idea that excites you? Funding your concept is a challenge that many entrepreneurs fail to overcome.
Sourcing financing can be difficult if you have no track record. However, it’s possible to find the money you need if you search hard enough. Here are five places you can raise the cash you need to get started.
1. Apply for a Loan
This traditional model is what most businesses use to fund their startup. If you require a large loan, think about taking out a second mortgage on your home. The bank will happily lend you money against the collateral in the asset.
If you don’t need a substantial sum, think about applying for a small business loan. Banks are under pressure to write up new investments, and they are likely to grant your request. If you only require a few hundred dollars to get started, consider a payday loan. Credit providers guarantee these loans against your paycheck. However, payday loans can come with exorbitant interest rates.
2. Use Your Tax Refund
Why not use your tax refund to get your business off the ground. Check your State refund statuses to see how much the government owes you. Hire an accounting service to do it for you if you are uncertain of how to check.
Every business needs an accountant or accounting service, so this may be the ideal opportunity to hire a firm. Once your refund check clears, you’ll have the financing you need to start operations.
3. Find an Angel Investor
Alternatively, for entrepreneurs that have no collateral, and no track record, your best bet to find the funding you need is to search for an angel investor. These wealthy private individuals have excess capital that they need to put to work for them.
Investing in business models offers a fantastic opportunity for them to grow their capital. Before you approach your angel investor, make sure you have a rock-solid business plan.
The majority of angel investors aren’t interested in taking an active role in your company. Instead, angel investors will want to know your exit strategy, how much return they can expect, and how long it will take them to recover their investment, including the profit.
4. Crowdfunding and ICO’s
This model is popular with tech company startups. Crowdfunding is a new-age system that draws capital from multiple investors through a platform like GoFundme. You register your business model on their website, including your funding target and business plan. Investors have the opportunity to contribute to your funding goal. You may receive contributions from multiple investors to reach your funding target. When you achieve the objective, the platform releases the funds to your account.
ICO’s, or initial coin offerings, are another funding model that’s become incredibly popular over recent years. The concept works by releasing virtual tokens for sale to the public, in the same way, public companies offer shares for sale when they list their company.
Investors are free to trade them at any time they like. The number of tokens for sale and their price determine the total capital you can raise with the project.
5. Government Grants
This model works if you have a concept that the government feels can benefit the greater good of the public. Check with your local state department for the requirements you need to apply for a grant. If accepted, you may not have to pay the startup capital back.
In Closing – Avoid Personal Risk
It’s important to minimise your exposure to risk when applying for finance. Avoid signing surety for any loan agreement. If you do, you may be held personally liable for the repayment of funds if your business fails.