Do you have a million dollar idea, but can’t find the funds to kick start your business? The recent recession has traditional loan sources dried up or tightly controlled, making it difficult for many entrepreneurs to obtain the funds needed to start their businesses. As a result, entrepreneurs have had to find other avenues to generate funds for their next million dollar ideas, some of which have made hungry startups into booming businesses.
1. All by Yourself. Many entrepreneurs realize that their business can get started a lot faster by “bootstrapping” or self-funding. There are a multitude of ways to self-fund like zero interest credit cards, dipping into your personal savings account, or leveraging other personal assets. Some people cringe at the idea of investing in their own business, but the big question is if you aren’t willing to invest in your business, why should anyone else?
1. All by Yourself. Many entrepreneurs realize that their business can get started a lot faster by “bootstrapping” or self-funding. There are a multitude of ways to self-fund like zero interest credit cards, dipping into your personal savings account, or leveraging other personal assets. Some people cringe at the idea of investing in their own business, but the big question is if you aren’t willing to invest in your business, why should anyone else?
2. Friends and Family. Some business owners feel more comfortable asking family and friends for startup capital. Often the people closest to you will believe in your vision and you. However, it is important for all parties to seek sound legal advice before money is exchanged. This will deter any miscommunications about funds down the road. Also don’t be greedy. Only borrow enough to get those critical functions started like the website, location, or advertising materials.
3. Angel Investors. Angel investors are a good source of capital, but will own a piece of the business so it’s important to have a good relationship with them. Trust is key with this investor, and a great way to generate trust is to pay back early investors with interest as soon as possible. It will entice them to put more into the business and they may even find other angels for you.
4. Crowdfunding. This is a new type of funding that uses the public to generate revenue for a startup. There are a few websites solely dedicated to this endeavor that allow entrepreneurs to pitch their ideas to the public in hopes of raising a pre-determined amount of capital. Generally, business owners reward public contributors with products in exchange for their donation like memberships to their services or free products.
5. Second Mortgage. These home equity lines of credit have become fairly common ways to fund startups. The amount of the second mortgage is the difference of your home’s value and the value of your current mortgage. A big advantage to second mortgages is that the interest rates are lower than most lending options.
6. Venture Capitalists. These investors fund businesses in exchange for equity and/or debt financing. Generally venture capitalists look for sure fire million dollar ideas to make up for low performing prior investments, so if your market is not growing, chances are you should look somewhere else for cash.
Before pursuing any type of capital strategy, make sure to have a solid business plan in place and to consult a financial expert to make sure your plan is on solid ground. Then may the capital be with you.
3. Angel Investors. Angel investors are a good source of capital, but will own a piece of the business so it’s important to have a good relationship with them. Trust is key with this investor, and a great way to generate trust is to pay back early investors with interest as soon as possible. It will entice them to put more into the business and they may even find other angels for you.
4. Crowdfunding. This is a new type of funding that uses the public to generate revenue for a startup. There are a few websites solely dedicated to this endeavor that allow entrepreneurs to pitch their ideas to the public in hopes of raising a pre-determined amount of capital. Generally, business owners reward public contributors with products in exchange for their donation like memberships to their services or free products.
5. Second Mortgage. These home equity lines of credit have become fairly common ways to fund startups. The amount of the second mortgage is the difference of your home’s value and the value of your current mortgage. A big advantage to second mortgages is that the interest rates are lower than most lending options.
6. Venture Capitalists. These investors fund businesses in exchange for equity and/or debt financing. Generally venture capitalists look for sure fire million dollar ideas to make up for low performing prior investments, so if your market is not growing, chances are you should look somewhere else for cash.
Before pursuing any type of capital strategy, make sure to have a solid business plan in place and to consult a financial expert to make sure your plan is on solid ground. Then may the capital be with you.
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