Starting a business costs money and finding the right funding option can be one of the most challenging tasks.
There are a wide variety of ways to fund your business and the best option is determined by the needs of your business and what you qualify for. It may be necessary to use multiple sources of funding to get the capital you need.
Below are a few financing options you may want to consider.
Small Business Loans
This common method involves borrowing funds from a bank or alternative lender. These loans require a good credit history, strong financial statements, and collateral that will prove that you are fit to borrow money.
Business Line of Credit
A business line of credit is a more flexible option – you can borrow up to a certain limit and pay interest only on the portion of money that you borrow. You draw and repay funds as you wish, like a credit card, as long as you don’t exceed your credit limit.
Angel investors are high net-worth individuals interested in supporting qualified businesses, and are often successful entrepreneurs themselves. They are willing to invest in your business in exchange for equity and decision-making power. You can utilize online platforms or networking to find angel investors.
Venture Capital Firms
Like angel investors, venture capital firms will give large scale funding in exchange for stake in the company. Securing financing from a venture capital firm can be highly competitive.
Friends and Family
This is one of the primary sources of funds for businesses in the early stages. Having support from your family and friends can show your credibility to professional investors – if your friends and family don’t believe in you, who will? Should you choose to go this route, keep it as professional as you would with any investor.
Platforms like Kickstarter allow companies to offer product samples or other goods in exchange for a contribution to an overall fundraising goal. These small amounts of money add up fast. If your campaign goes viral there is potential to attract attention from other investors.
Self-funded AKA Bootstrapping
While this may take longer, you don’t have to give up any equity or control of your business. Think credit cards, savings accounts or any personal finance options.
Looking for more resources? Head here to the Small Business Administration website.