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Top 6 Ways to Find Funding for Your Startup Business
Establishing your own startup is a great way to build a business that you have full control over. Best of all, you can create a startup that focuses on one of your hobbies, meaning you can transform your passion into something that makes money for you. To establish a startup, you’ll need to develop a business plan, and one of the first topics to cover is funding. After all, how is your business going to stay afloat until you start turning a profit? Here’s a look at the top six ways you can fund your next startup.
Crowdfunding proves to be a great way to fund a startup because it doesn’t require a single investor to put forth all of the funds. Instead, crowdfunding works by asking for smaller donations from multiple people. Another unique aspect of crowdfunding is that anyone can donate to it. People you have never met will likely donate because they have an interest in what your company does. Do keep in mind that just the same as investors want to see a solid business plan, so does the Average Joe. This means you’ll need to have all other parts of your business plan developed when promoting your company through a crowdfunding campaign.
According to Forbes, the top 10 crowdfunding sites to secure funding through are:
When you use credit card advances, extra income and invest your earnings into your startup, this is known as bootstrapping. Fortunately, many people have found much success through this form of funding. Not only does it require them to use their own monies, but it presents a motivator that drives the owners to succeed. And since many investors want to see proof of concept first, boostrapping provides an effective way to develop it.
Do you have equity in your home? If so, you can use this equity to fund your startup; this is another form of bootstrapping. You will want to keep in mind that using the equity in your home is like using your home as collateral, meaning if you don’t pay the money back, you risk losing your home. Using equity, however, is typically a good idea because you’ll get a low interest rate, sometimes as low as three percent, or even lower. You can use the funds in any way that you see fit, which provides you with flexibility in terms of spending the money where it is needed the most.
Another way to bootstrap is by borrowing from your 401k, and best of all, this form of bootstrapping comes with many tax advantages. You can even take a self-directed 401k to invest your money back into your startup by buying stocks from yourself.
As far as earning extra income to bootstrap your startup, there are literally thousands of ways. If you can write well, you can always be a content creator for Writer Access. Many writers on the platform work less than 10 hours a week and make more than $300. That’s an extra $1,200 a month you can invest toward your startup. You can also sell items on eBay to earn some extra cash.
Want to go in the opposite direction of crowdfunding? If so, you can always turn to the generosity of an angel investor. This type of investor tends to be extremely wealthy and doesn’t mind taking on the risk of funding a new company. If the company goes under, the angel investor loses the possibility of earning back his invested funds. Most angel investors prefer to own a large portion of the companies they invest in. In fact, it’s not unheard of for the investor to own as much as 49 percent. Do keep in mind that angel investors prefer to see proof of concept, and sometimes even a working prototype, before they will consider investing. After all, you must show that you have invested much time and money into developing your prototype before someone else will. Some of the best groups of angel investors include:
- Alliance of Angels
- North Coast Angel Fund
- Band of Angels
- Pasadena Angels
Merchant Cash Advances
Although a bit pricey, merchant cash advances are relatively simple to qualify for. You will need to have a steady cash flow coming through because the amount of money that can be lent to you will be determined by your current sales.
Take Part In Competitions
There are many competitions held on a yearly basis that allow startup founders to present their ideas and compete for funding. With a well-developed business plan, you can win one of these competitions. And best of all, many of these competitions not only provide you with funding, but they also give you expert advice on marketing, IT, customer service, and other topics that are directly related to keeping your startup afloat. Some of the best competitions to take part in to win funding for your startup are:
- Hatch Pitch
- NYC Next Idea Competition
- The Big Sell
- Shopify Build a Business
- William James Foundation Sustainable Business Plan Competition
Apply for Grants
Lastly, you can always apply for grants. This type of funding is usually directed toward startups that are serving a cause. For example, a child advocate business would be a great candidate for a grant from the government. Grants come in many forms, many of which come from private and public entities. To learn more about grants for starting a small business, check out this article on Startup Nation.
The six ways mentioned above are effective for securing startup funds. Remember, though, that securing money is only half the battle. You must develop a business plan that is centered around quality and care. With a quality product/service and great customer care, your business is sure to succeed.