Running your own business is a great way to experience career flexibility and financial independence. While it’s an idea that has crossed nearly everyone’s mind at one point or another, very few actually capitalize on such thoughts. There are a number of common barriers that are inherent to the startup process itself, but none are more critical than the first step: obtaining the necessary funds to begin with.
1. Enter into a partnership
One of the most common and most straightforward methods of funding a new business, investing partners can bring a lot more to the relationship than startup capital. While some prefer their investors take a passive role, others involve key stakeholders and partners in every part of the decision-making process. With industry knowledge, firsthand expertise and a dedication to the profitability of your company, third-party invests or partners can be a boon to the entrepreneur who is lacking funds.
2. Take out a loan
In some cases, taking out a loan with your local bank might be the only option when it comes to launching your business. Obtaining a loan can be a risky endeavor, especially with the lack of investment capital to begin with. It’s important that you understand all of the language within your contract and that you are clear on your payment deadlines, interest rates and any other fees. You’ll also want to avoid taking out a loan for more than you need, as such oversights can be difficult to recover from.
3. Pursue crowdfunding
A relatively new concept, crowdfunding campaigns have been used to fund everything from next-gen electronics to personal clothing lines and even Hollywood movies. In fact, the Veronica Mars feature-length film, which debuted in 2014, raised nearly $6 million in investment capital — almost $4 million more than what their campaign was originally asking for.
Microsoft’s Oculus Rift device, a virtual reality headset, also enjoyed crowdfunding success to the tune of $2.4 million. Moreover, all of this capital was raised within a period of 30 days. Not only does this showcase consumer interest in modern virtual reality, but it also shows their willingness to contribute through online fundraising platforms.
4. Take advantage of your credit
Entrepreneurs with exceptional credit can even use these accounts to fund their own startups. In fact, nearly 60 percent of small business owners relied on credit cards to avoid falling into bankruptcy during the 2008 recession. Although some would rely on their personal accounts, many banks and institutions offer cards that are meant specifically for small business owners or startup entrepreneurs.
5. Obtain state or federal funding
Pursuing state and federal grants is really a no-brainer when it comes to raising funds for a new startup. Although your options may be limited due to your location or your chosen industry, there are some great opportunities available to those who do meet the stringent qualifications associated with modern business grants. Unlike a loan, grants never have to be repaid; thereby freeing up some of your initial capital and giving you a head start on the road to success.
Warrington Farm Meats was recently able to secure $595,000 in funding through a loan from the Small Business Association. Operating in tandem with the Cumberland Area Economic Development Corporation and M&T Bank, the agribusiness was able to expand their butcher shop by more than 9,000 square feet.
6. Enter contests and other promotional programs
The entrepreneurial mindset has become so popular amongst today’s business insiders that many are hosting their own contests, competitions and other promotional programs to uncover new startups and capitalize on the best ideas. While these initiatives can be a godsend to those who win substantial cash prizes, the increased amount of exposure, which applies to all entries, can also have an effect on the future success of your startup.
7. Join a startup program
Startup programs, sometimes referred to as incubators or accelerators, provide would-be entrepreneurs and up-and-coming millennials with a wealth of information, resources and access to funding opportunities that are geared specifically toward new businesses. Most of these initiatives are highly community-centric and usually industry-focused; there are groups that cater to startups in technology, hospitality, healthcare and more.
8. Embrace sweat equity
Perhaps the least common option on this entire list, this process lets you offer up a small stake of your business in exchange for the input or contributions of others. Their assistance could come in the form of pretty much anything except investment capital, but their involvement will help offset some of your other startup costs and provide you with a more realistic funding target to aim for.
Maintaining success over a long-term basis
Now that you have some ideas on where to begin your search for startup funding, it’s time to put these resources to good use. While many of these are great solutions when seeking the initial capital needed to launch a business, many entrepreneurs find themselves returning to these channels when pursuing their career goals, expanding their operations and maintaining competitiveness.