11 Ways To Find Funds For Your New Business
You are not going to instantly find a load of cash in your bank account just by appointing yourself as a CEO.
If someone has told you that you don’t need any capital to start your business, you have probably been lied to by another one of those scammers.
Even if you are running the leanest business model possible, you will still need cash for:
- Business incorporation
- Phone bills
- Internet connection
- and more…
You need money to make money. Where can you find that money to kick things off?
1) Business concept competitions
Entrepreneurship is such a sexy word that there are many government agencies and corporations want to associate themselves with it by sponsoring competition events to reward winners and runner-ups with cash.
All you really need to do is present your kickass idea, preferably in a creative way, and you might actually win if it is really that good.
The prize money is often in the range of tens of thousands to hundreds of thousands. It’s like getting free money if you win. You don’t even have to give up any equity in your company for the funds.
2) Credit cards
This is something that your mother will surely be against. But would you believe that numerous successful businesses started with credit card debt?
The business owners were so convinced that they would succeed that they took the plunge and swipe the hell out of their cards. Now of course we hear about their stories because they succeeded. There are thousands more people who we never hear about because they failed. Miserably.
So this is a pretty risky method of fund raising, especially when you take into account the ridiculous interest rates of credit cards.
It’s worth taking this methods into consideration as it’s the fastest way to get cash in your pocket within the next hour… provided you do have some of those plastic things…
3) Barter trade
How far-fetched is it to suggest that you could probably barter trade anything your need for your business?
For many, this thought is outrageous.
But the fact is that there are millions of dollars worth of products and services being barter traded each day which we don’t read about. Bartering is one of the oldest ways of conducting business. And is has not gone extinct just because we now operate in a highly digitized world.
Everything is negotiable. You need to embrace this mindset if you want to be a good business person. This also means that everything can be bartered.
You might be able to get everything you need for your business by offering your services in exchange. Just be sure to make your offers valuable to your prospects. It would often be a no-brainer if you add real value to someone, and all he has to pay are his products at cost price.
4) Government grants
As small and medium enterprises grow steadily, government agencies have identified it as a big focus to help this segment grow and flourish. It adds jobs to the economy, it helps shrink the unemployed workforce, and creates better statistics for politicians to refer to when elections comes.
So a number of federal, state, and local government programs provide grants for startups kickstart their operations.
The problem is that there are usually quotas to how much is given out every financial year. So even though the government is hepped up with how they are helping startups, they also have to restrain themselves from over-promoting their grants. Because many businesses will have to be turned away once the quotas run dry.
This does not mean that you have little chance of securing a grant. It just means that these grants are usually disbursed to those who are proactive enough to seek them.
So go look out for what types of grants your business qualify for. You might be shocked to find that some of them can “gift” you money just by filling up a form! And they feel good about it as they are meeting their objectives of helping small businesses grow!
Go do some research now if you haven’t done so.
Crowdfunding is one of those concepts to took the world by storm in the last few years. This is not least, helped by the explosion of the internet and social media, further boosted by the extraordinary rise of mobile media.
This is truly just a concept with no new cutting edge technology involved. This is why many people are puzzled what took it so long to go main stream. Maybe the law had something to do with it.
No matter the case, thousands of businesses have reaped in millions of dollars in “free” money by presenting their ideas online. Some people see is as pleading for money. Even so, I don’t think the project starters who collected the funds mind that stereotype at all.
There are only 2 websites for crowdfunding that matter. Kickstarter.com and Indiegogo.com.
So if you are going to give this route a try, pick one of the two. Should you go for something else, it just says a lot about how serious you are.
6) Home equity
Nobody likes to hear that they have to put up the house in order to get business funds. But that could actually be the only choice for you… yet the most logical.
Because credit facilities that are secured with real estate as collateral are not “too risky”, banks and lenders are more willing to approve them with low interest rates.
There are basically 2 ways to borrow against your house, you can either take up a home equity term loan where you receive a lump sum disbursement, or get a home equity line of credit (HELOC) where you use it like a credit card. The former usually have a much lower interest rate.
Considering that you are theoretically using your own money via your home equity, and that you are looking at low interest rates, tapping into your home equity can be a shrewd way to fund your business.
7) Business loans
The main advantage of getting a proper business loan is that you don’t owe anyone any favors. How you repay it depends on how well you run your business. This can be a big motivation in itself.
The disadvantage is that you could be looking at interest rates in the double digits. Other than that, you could be required to submit an exuberant amount of income documentation to be considered for approval. It will still be up to the loan officers and approvers to agree on your requests.
8) Life insurance
There might be more uses for your life policy other than paying out upon your death. Some policies allow policy holders to cash out or loan against the cash value.
Because insurance policies are often something we keep paying premiums for without thinking, you might be surprised at how much your life policy has accumulated over the years.
Do check out the terms of your policies.
9) Loans from family and friends
I would classify these as a last resort.
The problem with borrowing from family and friends is that many people tend to lapse on repayment because they feel that the lenders would “understand”. That is just not the right mindset to go about business. It is as if telling yourself that failure is alright.
Other than that, people close to you might lend out of love and courtesy. Not because they think that your business will take off.
It’s just unhealthy in my opinion.
10) Sell your junk
You get to clear up your garage and fund your business yourself at the same time. Your second car is probably the prime target…
Investors, especially those associated with venture capital usually look out for businesses that have either a track record or some proprietary assets like patents.
But that doesn’t mean that there are no investors who would be willing to take a chance on you. Investors who could be open to that could be people you have worked with before and impressed them.
So pull out your black book and start looking at possible connections who you could have made a deep impression with in the past. They might like what you do and impressed with your personal traits. And therefore, willing to invest in your new business.
The drawback is that you have to be ready to give up a stake in your company attractive enough for them to bite.
In such circumstances, it would be best if you can find someone who can add value to the business you are starting. You can then get the best of both world by both getting funding and a partner of some sort.