Having a great idea and even a great business plan is completely useless unless you have the infrastructure to support your ambitions. In order to bring this to life, you need sufficient funds; however, gathering them is no small feat. There are many methods you can employ, yet each of them has its own advantages and disadvantages. Therefore, as a future entrepreneur, you have a tough choice to make, one of many that are to come. With this in mind and without further ado, here are six best techniques for funding your start-up idea.
1. Start a crowdfunding campaign
In 2018, more and more businesses try to fund their start-up by starting a crowdfunding campaign. The way in which this works is quite simple. You find a suitable platform, like Kickstarter or Patreon, present your idea to the online community and hope for the best. Of course, this isn’t nearly as luck-based as it may seem – in order to capitalize on your idea online, you need to know how to properly present it. Seeing as how most of your online donors aren’t necessarily major investors, they will be interested in two things: A) what they can hope for if your project is realized and B) the outline of your business plan in broad strokes.
2. Look for investors
Instead of relying on the disposition of the online community, you could try actively looking for investors that are willing to give you some of the money in exchange for an equity in your company. Unlike laymen in the crowdfunding campaign, major investors take a bit more serious approach and will certainly require a brief presentation, followed by an elaborate business plan. Furthermore, they might decide to borrow your business plan in order for their lawyer and accountant to further inspect it. The downside of this idea lies in the fact that, once you start selling equity in your company, you will no longer be able to make 100 percent autonomous decisions regarding your business.
3. Venture capitalists
Apart from traditional investors, you might also be interested in reaching out to venture capitalists. These are people who are interested in start-ups that promise a quick rise in value in the future. In other words, they are willing to pay for the equity in your company in order to sell it later on, when the value of your company skyrockets. Nonetheless, this might be exactly what you’re looking for.
4. Take a business loan
When it comes to gathering money to fund their start-up idea, the majority of people decide to look and apply for start up business loans. Applying for these loans is easier than it ever was before, due to the fact that you can now contact your credit union of choice online and even fill in the application this way. Here, you can answer a couple of questions that will determine your eligibility, position in the future company, business plan and a few additional relevant factors. Another reason why more and more people are turning towards these online loans is due to the fact that the procedure is quite fast, bad credit people are not dismissed right away and, in most cases, you don’t even need to submit a financial statement.
5. Sell an asset
A lot of people are so afraid of the interest rates and monthly credit payments that come hand in hand with loans that they prefer to find another source of income that they can use to fuel their business. One of the most logical and, therefore, most commonly used methods of funding your start-up is selling an asset in order to get the money you need. Depending on the amount of money you need to acquire, you can sell a property you own, a personal vehicle or even a jewelry collection that is in your possession. Still, seeing as how this sometimes results in a loss of an heirloom, a lot of people are reluctant to use this method.
6. Borrow from your friends and family
At the end of the day, if you have a friend or relative who you believe has the necessary amount and would be willing to lend it to you, you might try asking them. Nevertheless, this is something that people usually turn to as the last resort. Sure, as a person they know, you will have your mutual history to vouch for you, as well as the chance to get the loan that comes without the interest or fine print legal complications attached. On the other hand, failure to deliver on the pre-arranged terms might cause a strained relationship with the person you borrowed from. Therefore, it is usually for the best to keep your personal and business liaisons apart.
At the end of the day, each of these methods has its advantages and drawbacks which are so unique that it is impossible to claim with 100 percent guarantee that one method is clearly superior to others. It all depends on the unique situation you are in, your future aspirations, the amount of money you need and your ability to pay the money back. Nonetheless, this is an inevitable issue, as well as one that every single entrepreneur faces in the early stages of their start-up.
Emma Miller is a Sydney based writer with a degree in marketing. Interested in digital marketing, social media, start-ups and latest trends. She’s a contributor at BizzMark Blog.