Who knew that coming up with a business idea was the easy part of being an entrepreneur? The hard part is trying to get funding to bring your idea to life. It would be great if we all had rich uncles waiting to invest in our dreams, but unfortunately that’s not how the world works. In reality, there are only a few options available when it comes to funding a start-up. So, instead of dwelling on what you don’t have, lay your options on the table, and decide what you’re going to do to get the money your business needs.
Not trying to burst your bubble, but regardless of how great your business idea is, the revenue never starts coming in fast enough. You’re going to have to pay to play, so use the advice below to learn how to get your business funded.
Here are 7 ways to fund your start-up:
1. Personal Savings- If you’re thinking about quitting your day job to start a business, first take time to stash money away– lots of it. When you’re serious about becoming an entrepreneur you are more than willing to modify your lifestyle to free up extra dollars to put toward your dream. Instead of blowing your money at the mall or at restaurants, focus on your business, and stack your savings account so you can self-fund your start-up and call your own shots. You should at least save enough money to cover your business and living expenses for 6-months to a year.
2. Personal Investors- When starting your company, don’t overlook the resources that are closest to you. Anyone can be an investor. That includes your family, friends, colleagues, etc… You’ll be surprised to see who’s willing to back your play. People want to be a part of something great, they just don’t want to do the work themselves. Use that to your advantage, by giving them a chance to invest in you. Prepare your business plan, share your vision, and make your best pitch. Remember to explain what’s in it for them, and when they can expect to get a return on their investment. It’s easier to convince someone who knows you to take a chance on you, so start recruiting personal investors to get your business going.
3. Bank Loans- Take a trip to your local bank to find out what it takes to qualify for a business loan. Off the bat, you should know that your credit history, collateral, and business plan will play a major role in determining your eligibility. To increase your odds of getting a bank loan, stop by an SBA office in your area, and let a small business counselor review your business plan to make sure it has all the components the bank needs to see to approve your loan. The SBA office can play a major role in making it possible to get your bank loan, so make that critical connection and then head to the bank.
4. Home Equity Loans- If you are one of the lucky ones who still manages to have equity in your home– you can take out a home equity loan to fund your business. It’s always easy to get new money when you can easily prove that you have the assets and collateral to offer in return. A home equity loan is probably one of the easiest loans to get under normal circumstances, but this route may be challenging for a while, since the market knocked down the value of so many homes. If you do qualify for one of these loans, you should make this one of your first options.
5. Moonlighting- As much as you want to quit your day job to focus 100% on your business, it may make sense to continue working your job in order to fund your dream. In the start-up phase, you need to be able to cover your expenses and pay for resources your company needs. If you work during the day, moonlight at night, or take part-time gigs to keep money flowing in, you can self-fund your business and build a strong foundation for success.
6. Investors- I know it’s hard to believe, but there really are people with money to burn, who are willing to invest in your start-up. Whether you are looking for Angel Investors or Venture Capital Investors be prepared to give away a piece of your business in exchange for some serious start-up cash. When dealing with investors, you have a great chance of getting the big money you need to make your full vision come alive. If you have to give up a portion of your company in the beginning, you should have an exit strategy in place to buy out the investor when the profits start rolling in. Also, before accepting an investor’s offer, make sure you understand what the investor wants in return for his money. Some investors are supportive, silent partners, while others will want to have a more prominent role in your business. Know what you’re getting into, and make sure it’s worth signing that dotted line.
7. Peer Lending- Nowadays, there are social networking websites available to help you raise money for your business. You can actually go online, pitch your idea, and have your business funded by a community of your peers. Aspiring entrepreneurs can raise thousands of dollars online by persuading regular people to support their business ideas. If you’re looking to fund your start-up, you may want to give one of these peer lending networks a try. Check out sites like LendingClub.com, Loanio.com, Prosper.com and Kiva.org to learn more about how these peer funding programs can work for you.
Whatever you do, don’t let lack of funding shut down your new business idea. Use the tips and resources mentioned above to fund your start-up and bring your great ideas to life. Finalize your business plan, practice your pitch, and then go out there and get the money your business needs.