Starting a small business is never easy. Every day will bring new challenges, but also new rewards. Before you can get that far, however, you have to secure funding to get the business started. The difficulty of this will depend on a lot of factors; for example, what your idea is, the amount of collateral you have, and your credit score are just a few of the things involved.
Fortunately, there are many good sources for small business startup money. This guide looks at some of those sources and gives you the basic information you need about them.
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Venture capital is high-risk, high-potential small business startup money. The venture capitalist makes money from the loan by owning equity in your business. It is a form of private equity and does not have the same requirements as a bank to be eligible for the money. This form of funding can be easier to obtain than others, especially if your business relates to technology or healthcare, as those are prosperous fields.
It is ideal if your startup is too small to raise money in the public markets or cannot secure a bank loan. The downside is that a venture capitalist owns a part of your company until they sell their holdings.
Angel investors are people with the financial ability to get your business started. Unlike a bank, these investors do not make themselves known to the general public. You have to know how to find them. You need to find one that shares your passion for the business, and some of your moral and social values as well. It is vital that you have a connection with the investor so that they feel comfortable loaning you money. To help find them, share your startup idea with people that you trust. Find out if they know anyone that might be willing to invest in your small business.
Every year, large organizations hold various competitions for startup money for small businesses. One of them is Intuit’s “Love a Local Business” competition. Each year there is a different prize, such as a $25,000 grant for hiring employees. There are other grant competitions available, including form FedEx, Life123, and Miller Urban. You can find all the details, including restrictions, requirements, and prizes, on each company’s website.
Friends and Family
If you are trying to avoid borrowing money from a bank, you may be able to get enough funds to begin through relatives and close friends. For many entrepreneurs, this is a frequent source of funding for their small business. On the positive side, you will be getting money from people who support you and share your visions for your business.
On the downside, if you cannot pay them back, it can damage or destroy your relationships with them. Before you approach family or friends for money, make sure that you have a business plan to show them, including a repayment schedule, with interest, for money that is loaned to you.
Securing small business startup money is not as easy as it used to be. That does not mean you cannot succeed, but it means you will have to be thorough. There is really no such thing as “free money” in business. One way or another, you must pay for the capital you receive, either by repaying loans or offering stock. Starting a business is almost a business in itself, because there are many regulations to follow and decisions to make. Once you receive funding, you will take the next big step toward making your dream a reality.