How To Fund Your Business
How to Fund Your Business
There are so many ways to get money to start your fabulous business. From bootstrapping it to using Angel Investors you can find the money to get your business started or your product invented.
Angel Investors- Angel investors are usually affluent business people who are interested in utilizing their wealth to help worthy start-ups. In exchange for cash, they take an equity stake in your business, meaning they own a percentage of your company. Angel investors usually help entrepreneurs in the start-up phase of their business. They typically not only bring in the cash, but the business acumen as well. They like to mentor and really assist the business owner in getting the business up and running. Make no mistake however, Angel Investors are just as interested in their return on investment as the next investor, so make sure you have a solid business plan, a stellar prototype of your product if applicable and properly demonstrate how it can be profitable for them. Read More
Venture Capital- Venture Capital firms operate similarly to Angel Investors but do have some very distinct differences. Venture Capitalists give capital in exchange for equity just like Angel Investors, however VC firms usually only invest when a company is already established and showing great returns. They want to invest in a company that is doing well but needs capital to grow and expand. You will need to show what the needed capital will be used for and how it will significantly impact the landscape of your business. The returns must be significant or it won’t be worth the time and money for the investors. These are serious businesswomen and men, so be sure to have a killer presentation, a kick-ass business plan and anticipate answering some tough questions! Read More
Bootstrapping- Bootstrapping is using your own money and resources to start your business. Bootstrapping is about keeping your costs to an absolute minimum and getting creative. The worst thing about this approach is you will assume all of the risk. The best thing about this approach is you won’t owe anyone or anything a dime. Doing things like working from your home office, using supplies you already have or can borrow, bartering or trading services, keeping your day job, etc. are all ways to keep costs down while you start your business.
Credit- It’s not a big surprise that a lot of entrepreneurs use their credit cards to get the things they need to start their businesses. We don’t have to tell you the implications of this, such as high interest payments, increased debt, etc., but sometimes it’s the best way to go if you need to get started for just a little money.
Friends & Family- Asking friends and family for money is also a route to take when starting your business. If the business fails, you run the risk of damaging these personal relationships. If you do decide to involve family and friends in your business, you can either ask them to give you money in exchange for equity or ask them for money as a loan. Either way, they risk losing their investment if the business fails. If they lend you the money, you’ll want to create a promissory note that details the terms of your agreement. The terms can be set up between you and the other party any way that is agreeable to you both: interest percents, length of repayment, etc. If they invest in exchange for equity, outline their investment and involvement in your operating agreement. Read More
Home Equity- If you have equity in your home, you can borrow against that to start your business. Because of the recent downshift in the economy, banks are extremely hesitant to loan against home mortgages right now. You put your home at risk in the event the business doesn’t do well by going this route.
Bank Loans- Asking the bank for a small business loan is also an option. Because of the economic downturn, entrepreneurs are finding it harder and harder to get a start-up loan. Be prepared with an amazing business plan and some collateral when asking for a small business loan. Read More
Grants- There are lots of grants out there to help you get your business up and running, especially for women business owners. Typically though, grants require a very specific set of criteria that must be met in order for you to apply. For example, your business might have to be in the sustainable energy field, create new jobs or require the same amount be given in financing. For the most part, grants are never awarded to individuals either. They are given to organizations, non-profits, institutions, etc. that benefit a community or group.
Before you start asking for money, be sure your business plan is finished and polished. Do not ask anyone for money until you have a solid business plan in your possession. You will be wasting your time and the time of any potential investor.
Funding Resources: It’s up to you, the business owner, to do your due diligence in researching and selecting funding sources. When speaking to different investors or vendors, always bring along a Non Disclosure Agreement. This is an important step in protecting your business in the early stages.