5 Ways To Finance Your Startup : Under30CEO 5 Ways To Finance Your Startup : Under30CEO
arrow
Join the Under30CEO Community We deliver tips, tools and inspiration for your business. Daily to your inbox.

5 Ways To Finance Your Startup

| March 30, 2012 | 2 Comments

small business fundingYour business is never going to get off the ground unless you have the money to do so. Most small businesses fail simply because they do not have the money to keep going. Employee salaries, equipment and supplies are all costs that can hinder the development of your company. Fortunately, you have many options when it comes to getting the financing necessary to grow your company.

Venture Capitalists

Venture capital is a common way to get money for a start-up. The process for getting venture capital is a lengthy one. You need to present a business plan as well as show that you have a stable management structure. Most venture capital firms are going to want an equity stake in your company. This means that they are going to want to own part of your company in exchange for the seed money. However, venture capital can provide as much money as the company needs to make sure your idea can succeed.

Getting A Loan From Family Or Friends

Your family could be willing to loan you the money you need to start your company. However, be sure to treat them like you would any other investor. Do not assume that a family member wouldn’t want to see that money back simply because they are family. In fact, not paying back a family member who loans you money could create more problems than it is worth.

Bank Loan

You can always try to secure financing from a local bank. This option is going to work better if your company has some sort of track record in regards to paying back loans. Otherwise, you might be looking at securing a personal loan to cover your business expenses. This could negatively impact your credit should you fail to repay the loan. Some tips to increase your odds of getting a loan are:

-Incorporating Your Business

-Asking For A Small Loan To Establish Your Credit History

-Finding Collateral To Secure Your Loan

Merchant Cash Advance

A merchant cash advance is an easy way to secure financing for your company. Most merchant cash advances require no credit check. These types of loans are good for companies that are just starting to see a decent flow of money into the company. However, the company is still not steady enough to commit to a strict repayment schedule. The company repays the cash advance with a percentage of credit card receipts. These loans typically do not come with a deadline for full repayment of the loan.

Angel Investors

Finding an angel investor can be a great way to find financing with few strings attached. These investors tend to want nothing more than for your company to succeed. However, angel investors do not just give away money for nothing. They may want to sit on your board of directors as a condition of investment. Most will want to see a business plan that gets them excited about what you are doing. For example, an angel investor may be interested in seeing man colonize space. Therefore, your company should indicate how this could be made possible because of your new product.

Securing the right amount of working capital is crucial to starting a successful business. It is important that you come up with a plan before you ask for any type of funding. Getting a loan or other investment means you have an obligation to repay that initial investment. Failure to do so can damage your credit, potentially damage relationships with family and damage your reputation as a business person.

About the Author: Victor is a blogger and economy student from Brisbane. He is interested in small businesses and startup companies as well as exploring areas like car financing and insurance.

Opt In Image
Awesome People + Awesome Places
Travel around the world while making new friends

Under30Experiences curates awesome experiences around the world for young travelers.

Tags: ,

Category: Funding

  • http://getbrode.com/ Marc Brodeur

    I would have put these in a different order, and added another key one:
    1) Your own savings, with a ruthlessly lean startup plan
    2) Family
    3) Angels (i.e. a wealthy benefactor with no hurry)
    4) VC (professional investors on a timetable)
    5) Merchant loans
    6) Banks (pretty much won’t even talk to you unless you have 3 years of positive cash-flow)

  • Pingback: Why You Should Consider Peer-to-Peer (P2P) Lending for Your Business