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5 Ways To Fund Your Startup

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5 Ways To Fund Your Startup

Every business costs money to get off the ground. Some will cost more than other depending on whether you need a premises, inventory and staff (if you’re selling a service from home, your startup costs may be minimal – although you may still need to afford marketing and software). Contrary to popular belief, you don’t have to have money behind you to start a business. It can certainly help, but there are other ways of funding your dream business. Here are five ways to fund your startup.

Use savings

You may already have inherited savings to use or funds you’ve built up yourself. If not, you could take the decision to start saving up now. This could mean taking up a full-time job and working all hours you can to get your business budget. Alternatively, you may be able to sell old belongings gathering dust in your home for cash. Saving up is the hardest way of funding a startup – many may not have the patience of willpower for it. You won’t however have to deal with loan interest or shared profits as other routes may involve.

There are special business savings accounts which will accumulate more interest than regular accounts. It’s worth using these savings accounts if you’re going to take the savings route. You may also be able to make money by investing in something, but this is a gamble and likely a much longer process.

Take out a loan

Many budding entrepreneurs take out a loan to get the ball rolling. Many banks offer specialist business loans. These will have low interest rates, but may require you to have a solid business plan and a good credit rating. Companies like New Horizons can offer bad credit loans that may be better suited for many people, however you should be aware that you’ll able to borrow less and interest will be higher. On top of this, there are peer-to-peer lending sites like Ratesetter in which multiple people can loan you money. Loan brokers may be able to help find the best loan for your needs.

On a related note, there’s also the option of starting a business on a credit card. However, this can sometimes be dangerous as many people have less of an idea of how much they’re spending when flashing the plastic. If you’re good at budgeting and can trust yourself to not exceed this budget, feel free to use a credit card.

And of course, you may be able to get a loan off of a friend or family member. These may be interest free and more flexible in terms of when you pay the amount back. You could even ask them to take out a loan for you. Just be careful if you are choosing this option as failing to pay back such a loan could put a strain on your personal relationships with the people closest to you.

Seek investors

Investors will pay you money in exchange for a share in your future profits. Getting investors to believe in your business idea and offer you money isn’t easy. Many investors will look for a solid business plan which guarantees them a return. They may also want evidence that you have the skill as an entrepreneur to make your business work.

You’ll need to decide how much you want to borrow and how much of a portion of your profits you’re willing to give away. You’ll then need to write a convincing pitch.

There are many places to approach for investment including investment companies and individual investors who may be fellow business owners themselves or simply people with a lot of money in their pocket. Approach lots of people and don’t let rejection dishearten you. If someone does reject your business proposal, make sure to ask them exactly why so that you have clear idea of how to improve your business plan or next pitch. You could choose to work with an investment broker, who may be able to find you someone willing to invest money in your business. They may also be able to help with negotiating, which is a key part of the process.  

Crowdfund

Another way to build funds is to create a crowdfunding campaign. This is a form of saving that relies on the generosity of common people. A good business idea will generally get more funding. There are sites set up for crowdfunding like Kickstarter, however you could find your own way of asking for donations. Often, like a charitable cause, it’s easier to get donations by giving people some form of personal gain. This could involve hosting an event such as a cookie bake or a paid educational seminar or a competition in which the profits go towards funding your business idea. You may not be able to raise a lot through crowdfunding alone, however it could be used in conjunction with another form of funding allowing you to save up less through work, take out a smaller loan or ask for a smaller investment.

Split costs with a business partner
Is there somebody else who is as enthusiastic about your business idea as you are? Many of the greatest entrepreneurial ideas are kickstarted by a business partnership. By having a business partner, you both can share the startup costs, allowing each of you to spend less. You can also share the responsibility, which may make running the business less stressful in the long run. The major drawback of going into a partnership is that you both also share the profits. As a result, your business has to be sustainable enough that it can provide the two of you with a decent wage. Most partnerships are split 50/50, although in some cases a partnership may be unevenly split. In the latter instance, the person receiving the least amount of money will have less responsibility. Make sure that you enter a partnership with someone that has as much enthusiasm and determination as you do – you don’t want them pulling out when things get tough, leaving you with the entire burden.

I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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