13 Options for Getting Money to Start a Business

Financing is every aspiring business owner’s biggest worry. However, it need not be as various options can deliver the needed finances. Obviously, if the money is not coming from your pocket, there will be compromise; but provided you get a good deal, you can always recoup initial bargaining chips value-wise as the venture soars. Below are 13 viable channels to get business funding.

Family and friends

Several renowned entrepreneurs got initial funding from parents and family with famous Shark Tank personalities Kevin O’Leary and Daymond John being among them. This strategy has its pros and cons: on one end, you get money without many strings attached, but then again, if things go south, you may end up souring relationships.

Crowdfunding

Crowdfunding is an innovative, contemporary method of funding excellent business ideas, but unfortunately, it has been attracting negative publicity of late because of unscrupulous persons and the high rate of enterprise failures. However, this does not make it any less effective as a way of earning capital. Try your luck on sites like Indiegogo, Kickstarter, Rockethub, and others.

Pitch to venture capitalists

This was the method Uber used, and despite some rejections, they finally got capital. Concretize your idea into an appealing pitch, and locate venture capitalists who are likely to be interested in your type of business. Then, do your best to deliver a presentetation that will hook them. Note that this is easier said than done.

Sell something

Sell the things you do not need to raise extra money to get the enterprise rolling. Robert Kiyosaki, the author of Rich Dad Poor Dad, had to live in his car for several months as he built his business. His case is a bit extreme, but the takeaway here is that you should make some sacrifices to rake in the extra dollars.

Remortgage your home

If you have a house, remortgaging may offer a handy line of capital. However, if yours is a high-risk venture, this might not be the best route to take. It is more preferable in situations where the primary goal is business expansion.

Get a job

It sounds counterproductive, but if you have an education, it may offer the best channel to accumulate money to get into business. If you can land a well-paying job and concentrate on saving, you can manage to put away enough in a few years. Moreover, you will get valuable experience that may help you turbo boost the enterprise.

Borrow money from your 401(k)

Borrowing retirement money is risky, but business, in itself, is about managing risk. Often, it is possible to borrow some of your retirement money at no interest for two months (60 days) provided you pay it back on time. Before you take this route, consider whether you can handle the consequences if things fail to work out.

Factoring

This method will work if you have another business which you are willing to capitalize on to raise funds to start another one. It is a thriving industry worth over $150 billion, and it involves the sale of accounts receivables to interested parties at a negotiated rate. Expect to lose between 10% and 20% the value of your accounts receivables.

Look for a grant

Research at all levels (federal, state and local) to see if there are grant opportunities you can take advantage of. The most involved organizations are the USDA, Treasury Department and the Department of Commerce. Expect oversight, follow-ups and various other technical specifics.

Microfinancing

A banking approach responsible for a lot of empowerment in the east, microfinancing has been slowly taking root in the U.S. It involves the lending of small loans by institutions; often, to the underprivileged based on factors such as previous sales, your passion, business acumen, and the available opportunities. It is a handy alternative if you need a small loan: typically, $10,000 or less.

P2P (peer to peer) lending

Peer to peer lending is primarily borrowing from ordinary people with extra income that they want to invest. Expect steep interest rates and in-depth screening. Factors considered include the loan amount, the economy, your credit score, loan duration, among others. Popular p2p sites include Lending Club and Prosper.com.

Competitions

If your idea is proprietary and groundbreaking, you can win funding with few strings attached through business funding competitions. They are often judged as per the business idea and plan, and the money up for grabs tends to range between $75,000-$200,000. Shark Tank, the MIT 100K Challenge and the Amazon Web Services Startup Challenge are a few examples.

Incubators

With some effort, you can get your business incubated by an organization of choice and thereby access mentorship, funding, and other services crucial to a startup. The only drawback is that incubators come with steep competition which, is not necessarily a bad thing since business and competition are two sides of the same coin.

Riding the waves of entrepreneurial success calls for passion, an unquenchable will to succeed, and a great idea. With those in place, you can figure out all else including financing. With the above alternatives at your disposal, do not let lack of seed money hold you back.