Entrepreneurs face quite a few challenges. However, the largest one seems to be finding the funds you’ll need for your new business. From hiring staff to renting office space and buying materials, every single thing required to start a business costs money.
If you haven’t inherited quite a hefty sum from a relative or are independently wealthy, you’ll need to find that money somewhere. Here’s a look at a few places to start.
This option is growing in popularity rapidly. Crowdfunding investment sites allow entrepreneurs to sign up and try to raise funds on them. You’ll set a monetary goal for the amount you want to raise and a time limit in which you want to raise it. You might also devise rewards for people who donate certain amounts as an incentive.
SBA (Small Business Administration)
The government of the United States has a rather personal stake in the success and growth of the small business sector. Because of this, the SBA offers a variety of types of small business loans to entrepreneurs to assist them with getting started. If you have a non-profit business or an educational type of business, you may also want to check out the grants they offer.
This type of investor stands apart because they always seem to be looking for the next great thing. A lot of the largest tech companies, such as Yahoo! and Google got their funding from angel investors. At the most basic, getting money from this type of funding nearly always requires you to give them a bit of equity in your business in return. Any transactions with this type of investor must be registered with the SEC (Securities and Exchange Commission).
These investors are similar to the investors we just talked about in that they have money they want to invest in new businesses that have a high potential for monetary returns and growth. Venture capitalists also tend to look for a share of the business in return for their investments, but they also tend to want to have a say in how the business is run. They like making money on their investments but want to have a bit of control in the management of the business.
These are largely reserved for non-profit businesses and are typically granted by institutions and given to individuals who wouldn’t typically qualify for traditional bank loans. Instead of gifting donations to the non-profit, organizations give them microloans to invest in economic opportunities. These are also quite popular in small, developing nations.
Starting a business can be tricky. In many instances, this risk is what keeps traditional lenders from giving entrepreneurs loans. This can be even more difficult when the entrepreneur hasn’t invested any of their own money. If you own a home or have savings and are willing to take out a second mortgage or refinance, it’s well worth exploring these options if you feel comfortable taking the risk.
Whether or not you believe this, there are actually organizations out there that occasionally offer monetary rewards, or will even offer financing, to entrepreneurs or businesses that enter into their contests. The judging criteria, entry fees, and eligibility requirements for these contests can greatly vary. However, if you have confidence in what you’re offering, this can be a terrific way to get some additional cash.
It doesn’t matter which funding method you go with; you’ll need to spend a bit of time to fully investigate all of the conditions and terms to ensure that they’ll mesh well with your business plan. Best of luck!