5 Business Funding Tips for Your Start Up
Do you want to start a business but have no idea where to begin with funding? Check out this article for the 5 best business funding tips for your start up!
Quick question: What do all start up founders have in common?
They are all innovative and creative thinkes, no doubt. But is that all they share? Find any start up founder today and one of the first things they’ll tell you is they’re thinking of their next funding round!
Sure, access to capital is no longer as difficult as it was a couple of years ago, but some founders can still experience challenges, especially if the business model isn’t so promising.
Are you in this conundrum? Worry not!
In this article, I’ll be sharing business funding tips you can use to secure the capital you need to start a business from scratch or take your start up to the next level.
1. Go All in With Your Own Resources
Starting a business is an opportunity to become an entrepreneur and chase the American dream. However, you’re also exposing yourself to risk. If the business fails, you stand to lose your investment.
It’s for this reason most founders are always hesitant to pump a lot of their own money into their businesses. But is this the right move?
While it’s understandable that you might not fancy putting all your savings and retirement money in your business, you’re sending the wrong message. What you’re telling yourself (as well as any potential partners) is you think the business is too risky.
Yes, going all in with your own resources can be risky, but it’s an ideal business funding source. There is no debt to worry about, and nobody is going to tell you how to spend your money.
2. Tap into Family and Friends
Even though not two businesses are quite the same, the cost of starting one from scratch is between $3,000-$5,000. If it’s a tech startup, you’re going to need much more.
Yet, believe it or not, the vast majority of people only have about $1,000 in their savings accounts! This means that for most aspiring entrepreneurs, their own resources may not be enough to fuel the launch of a successful business.
Before you start looking into commercial business funding options, tap into your family and friends.
We all have that friend or relative who appears to have a decent amount of money stashed away in a bank account somewhere. If you do, approach them with your business plan and request funding.
Now, when it comes to dealing with family and friends, there are a couple of approaches you could take. It all depends on your relationship with the person.
One, you could ask for the amount you want without offering anything in return, save for a commitment to repay the money in full within a certain time frame. This approach is ideal when the lender is a very close person; one who believes in you and just wants to see you succeed. Such a person may not even be interested in recouping the money.
Two, you can offer a share of your business in exchange for the business funding. Or you could offer to pay back with interest, or bring in the lender as a silent partner.
Whichever option you go for, it helps to have the transaction down in writing. Let them know about the risks they’re exposing themselves to, particularly if they’re keen on getting back their money.
3. Launch a Crowdfunding Campaign
Kickstarter, GoFundMe, Crowdrise and Indiegogo among other crowdfunding platforms are all innovations of the internet age. Collectively, these platforms help people raise north of $30 billion every year!
If you’re looking for business funding, why not run a campaign on any of these platforms?
All you need to do is identify the best platform, set a funding goal and pitch your product or serve. This is very important, as the ability of your campaign to pull in funders really depends on the pitch. Through the power of writing and storytelling, you have to make people believe in you and your business.
Other tips to have a successful crowdfunding include offering great rewards and hyping it on social media channels such as Twitter and Facebook.
4. Equity Financing
The popular American TV show “Shark Tank” is perhaps the poster child of start up equity financing. On the show, entrepreneurs pitch their products or businesses to “investor sharks” and request funding in exchange for a stake in their company.
Whether it is $150,000 for 10% stake, $200,000 for 20% stake or $500,00 for 2% stake, there is no doubt equity financing is an attractive option for business founders.
The first step to equity financing is to place a valuation on your business. How much is it worth? Next, determine how much equity you’re willing to dish out, and then begin the hunt for equity investors.
There are thousands of venture capital firms, and as long as your business has a high-growth potential, landing an investor shouldn’t be a big deal.
One thing, though. Be careful not to offer too much equity in the early stages of your business. You’re likely going to need more funding in the future, so offering huge stakes so early could leave you with a minority stake in the future.
5. Commercial Debt Financing
Is there anybody who like commercial debt?
High-interest rates coupled with stringent requirements and bureaucratic approval processes means bank loans (and other commercial loans) are the least favorite business funding option for start ups.
However, these loans do have their advantages. Compared to credit cards and overdrafts, bank loans are the cheaper option. Plus, they have fairly long repayment periods (typically 3-5 years), meaning the monthly repayments won’t overburden you.
You will also get to retain full ownership of your company.
The success to securing commercial loans lies in cultivating a healthy relationship with your bank. This involves maintaining active accounts and not defaulting on any loans.
Finding Business Funding for Your Start Up Isn’t Out of Your Reach
A healthy bank balance is crucial to the success of any business, start up or established.
With business funding tips fleshed out herein, I believe you’re are now in a better position to identify the best funding option for your start up.
Got any questions? Looking to share your experiences with me? Let’s connect!
