startup business funding

How to Get Funding For Your Startup Business?

Hundreds of thousands of budding entrepreneurs dream of starting their own business. However, getting funds for a startup business isn’t as easy as it may sound. 

Whether you’re looking to get funding for your startup business or you need money to expand your existing setup, this comprehensive guide to getting funds for your business will help your startup get off the ground and pave the way for long-term success and longevity.  

Get a Bank Loan

Sadly, banks are not interested in lending small business loans. Financial institutions need a foolproof business plan and impeccable credit scores before they’ll consider granting a small business loan.

Also, lending standards have gotten rigid in recent years. Some banks may also want you to invest your personal finances just to ensure you’re committed to making your business work. 

If you choose this option, make sure you select a bank that’s known for lending money to startups.

Use Your Savings

According to Forbes, many startups use their savings to finance their business. If you plan to use your savings to fund your business, you must first allocate enough to provide for your fixed living expenses, including rent, utilities, and groceries to last them for at least a year. Remember, startups take time to generate some real-time profit. 

Also, you should try to increase your savings by eradicating unnecessary expenditures. For instance, you can get rid of services you don’t use on a regular basis, such as gym memberships, timeshares, and car-sharing memberships, etc. 

You must also reduce your credit card debt. Don’t forget to call your bank and request a lower-interest option. 

Tap into Your 401(k)

You can tap into your 401 (k) funds you’ve accumulated for years if you’re unemployed and planning to start your own business. While the process is simple, there are many legal complexities involved. So, it would be better to seek the help of someone experienced in establishing a C corporation.

Getting funds for your business with your 401 (k) may seem like an attractive idea, but you’ll lose your business and future security if things don’t pan out as expected. 

Consider Unsecured Direct Funding Options

Direct funding is by far the best option available. The lenders offer same-day financing options to businesses across different industries.

The best thing about these loans is that they get approved quickly. Also, there is no collateral required. The only thing you should pay attention to is to choose a lender that is reliable and has a solid market standing. 

Try Crowdfunding

Many crowdfunding websites can help you get funding for your business in a stress-free manner. What you need to do is set a goal for how much money you would like to raise for your business project. 

The process involves a large group of people for money on crowdfunding websites, such as Kickstarter and Indiegogo. These people generally receive something in exchange for their investment. 

Venture Capital and Angel Investors

While venture capital and angel investing may seem like great ideas for getting funds for your startup, these options are generally best suited to established companies with smooth cash flow. 

The economic turmoil of the past few years has complicated the venture capital or angel investing game. But if you still want to go for this option, make sure to keep the following things in mind. 

  • Hire an experienced adviser into your management team to increase the credibility
  • Show your true passion. An angel investor can easily spot the difference between a passionate entrepreneur or a fad follower
  • To gain the attention of an angel investor, you need to have complete market assessments, marketing/sales plans, and a detailed competitive analysis report. The idea is to show your investor that you know your stuff and hold the capacity to turn their money into a profitable business

Secure an SBA Loan

Since banks have a strict lending policy for small businesses, SBA can act as a trustable source that grants loans to almost all types of small businesses. 

Your business must meet the government’s definition of a small business in order to qualify for the SBA loan.

Raise Money from Your Friends and Family

Requesting friends and family for finances is another popular way to fund a startup. But when you turn your acquaintances into creditors, you’re not only putting their financial future at stake but also risking relationships. 

If you’re choosing this route to get funding for your business, just ensure you provide them with financial projections. Also, you must freely discuss the risk ratio to reduce the likelihood of unpleasant surprises.

It costs money to start a new business. Getting funding to start a business is more challenging than ever. All of the above-listed solutions come with their pros and cons. As an entrepreneur, it is your responsibility to do your research and choose a funding option that best fits your startup needs.

Best of Luck!

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