Funding for Your Business - 13 Ideas for You

Online Fundraising ideas

A business without appropriate funding sources will be drowned in a sea of debt. Funding is the fuel that powers a business. The importance of money in business cannot be exaggerated. With rare exceptions, money is crucial to get a business up and running. Once profits start coming in, some of that revenue can be reinvested in the business to attract more customers and rake in even more profits.

Proper planning and cash management ensure that business funds are not wasted on initiatives with a poor return on investment.

How to Get Funding for Small Businesses

Organizing the funding needed to start up a business is one of the biggest hurdles that every aspiring business owner must pass. This business startup journey is made even more difficult as new and aspiring entrepreneurs are often turned down for business loans by many traditional lenders. The good news is that there are plenty of alternative sources of funding that entrepreneurs can use to finance their business dreams. Here are a few ways to get funding for your business.

1. Using Business Credit Cards

There is no doubt that business credit cards are one of the most efficient ways to fund a business startup that any business owner can seriously consider. It is a cost-effective way of financing startups, as they come at relatively low rates. Some business credit cards also offer zero-percent interest promotions, often for a period of 6 to 12 months. Business owners can also build their business credit history if they use these corporate cards in a responsible way.

2. Using Your 401(k) to Finance Your Startup

A 401(k) Plan is a defined contribution retirement account that allows employees to save a portion of their salary in a tax-advantaged manner.

A 401(k) business funding strategy can absolutely provide an aspiring business owner with startup funds, but this is a plan that may attract serious restrictions and certain tax implications. If you are not a financial expert, then it is advisable to seek the services of a qualified financial expert before you borrow from your 401(k). Still, if you're currently employed and aspire to start a business, the balance of your 401(k) can be a source of funding.

3. Crowdfunding

Crowdfunding is based on raising small amounts of money from a large number of people. This is done mostly through crowdfunding websites such as GoFundMe and Kickstarter. These campaigns may at times rely on the strength of your business campaign, with the business expected to reward supporters in exchange for the investment they put into the business.

4. Angel Investors

Angel investors are generally known to be wealthy and are prominent for having funded many startup businesses. These are people who have deep pockets and can invest in your startup ideas in return for a given percentage of the ownership of the business. Aspiring business owners can take inspiration from the fact that some of the most prominent companies such as Yahoo and Google were helped in their early stages with angel investors.

5. Bootstrapping your startup business:

Self-funding, also known as bootstrapping, is an effective way of startup financing, especially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can invest from your own savings or can get your family and friends to contribute. This will be easy to raise due to fewer formalities/compliances, plus fewer costs of raising.

6. Equipment Financing

If you need startup funding to purchase equipment, then consider equipment financing a top option for funding your venture. Equipment financing for startup businesses is particularly apt for your situation because of its self-secured nature. Because the equipment you purchase will act as collateral for the very funding you use to purchase it, equipment loans will be easier to qualify for, even if you don’t have much time in business.

7. VC Firms

A Venture Capital Firm is a limited partnership or limited liability company that invests in startup businesses with the potential for a high return on investment for their pool of investors. Most VC firms are actively hunting for startups that want to get funds in return for equity. But you can also find them directly through their websites or via startup events. The best way to find VC firms is by attending startup pitching sessions. The best example of this is Shark Tank, where you tend to pitch for investment to sharks in the tank.

8. Invoice Financing

Another funding option that you’ll be able to access with little-to-no time in business is invoice financing. Through invoice financing, you’ll be able to access an advance for a portion of your business’s outstanding invoice value. This form of startup funding will rely on your business already having at least one invoiced customer, but many invoice financing companies will require you to have very little time in business to be eligible for funding.

9. Business incubators

Business incubators (or "accelerators") generally focus on the high-tech sector by providing support for new businesses in various stages of development. However, there are also local economic development incubators, which are focused on areas such as job creation, revitalization, and hosting and sharing services. Commonly, incubators will invite future businesses and other fledgling companies to share their premises, as well as their administrative, logistical, and technical resources.

10. Getting Finances from Friends and Family

Unless you have complicated relationships with your friends and family, they can be a potential avenue to finance your startup, especially if they have some cash to spare. Borrowing from friends and family is an interesting alternative to funding a startup and comes with some commendable benefits such as low- or no-interest payments, as well as avoiding the hassles that you may have to face in other types of loans.

11. Selling Assets

Some aspiring business owners have financing methods right at their fingertips but don't realize it or aren't willing to take the plunge. If you can bear to part with some of your possessions, selling one of your assets (such as a car) can help you attain the cash you need to start up a business.

12. Home Equity Loans

Home equity loans allow you to borrow against the value of your home. These are some of the best ways of financing a business startup, as they offer flexible interest rates and can be a low-cost form of borrowing. This is a viable solution for aspiring business owners who are homeowners with equity.

13. Bank loans

Bank loans are the most commonly used source of funding for small and medium-sized businesses. Consider the fact that all banks offer different advantages, whether it's personalized service or customized repayment. It's a good idea to shop around and find the bank that meets your specific needs.

Conclusion -

There are many ways to fund your business and these are a few ways to get you started. It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business.