How to Fund a Start up Business
Starting a business is the dream of many people tired of the daily grind of 9-to-5 jobs, but funding is always a major obstacle. With the economy the way it is, it is not easy to raise the funds unless you are willing to take chances and think outside the box. Here are some ways to fund a start up business that might work for you.
Use your savings
It is a risk, but if you really believe that your idea for a business will work, the best source of funding is you. You can break into your nest egg or your kids’ college fund to get it started. You will have to quit your job to give it your all, but it may pay dividends in the end. Alternatively, you can start it as a sideline, using whatever extra money you have and keeping your day job, until your business becomes self-sustaining. It will be slow work, but you risk less if you fail.
Use the Internet to get ordinary people interested enough in your idea to invest in it. Popular sites for crowdfunding are Indiegogo and Kickstarter. Indiegogo is more for technology-based start-ups, while Kickstarter specializes in creative work. However, if your business is a little bit of both, you can take your pick. The main difference between the two is that Kickstarter will only process pledges from your supporters if you reach your goal; Indiegogo gives you the option to receive funds even if you don’t. It depends on you and your powers of persuasion to make sure that you reach your goal. Both sites take a 5% commission on all the funds processed for your project.
It may sound crazy, but there are circumstances where it makes perfect sense to use your credit to start your business. For example, if you have an opportunity to get X number of items for a ridiculously low price, and you already have a customer or customers guaranteed buy them from you at double what you pay for them, you stand to make 100% profit if you can pull it off. All you have to do then is to pay off your credit card as soon as you get the cash, and you can use the money you made to buy more items. However, if you do not have any assurance that you can make your money back within 30 days, credit cards will not work for you.
Family and friends
The best way to raise funds for your start up business is to pitch it to your family and friends. They are a captive audience, and are more likely to give you the benefit of the doubt than banks and other lenders. Of course, you risk alienating them if you don’t pay them back, so make sure that your idea is a good one to have a better chance of success. Even if it fails, make sure to pay them back a little at a time to keep in their good graces for your next business idea.
There is no reason why you cannot start your own business if you are willing to do the work. Getting funds may actually be the easy part. Before you make your move, make sure you are ready to commit to the business.