Creative Ways To Get Financing For Your Start-Up

There are many different ways to finance your start-up or small business.  However, for many, traditional sources of capital are not an option until there are several quarters of proven revenue and other considerations.  As a result, many start-ups have to get creative when it comes to getting money.

Savings

Personal savings is the most common form of raising capital for a small business, but it is the least creative.  Where the creativity comes in is bootstrapping your way to success on your small budget.  The average capital contribution to a start-up company is around $10,000 – which is not easy to accrue, and is even harder to part with when the time comes.

Home Equity

Many entrepreneurs look to the assets they already have to get financing.  Some business owners look at getting home equity loans or second mortgages to fund their businesses.  While risky, this can give you a greater sum of money than other options.  To see if you could qualify, you need to talk to a banker.  Visit NPBS to learn more about whether a home loan for your business could make sense.

Business Plan Competitions

Many business schools and start-up incubators host competitions in which you can win start-up capital as a prize.  This has several benefits – first, getting capital to finance your venture, and two, you can pitch your idea to venture capitalists, angel investors, and other business leaders that can give you great feedback.

These competitions have proven to be more than just contests – they have proven to be real launching points for many small businesses.

Government Grants and Funding

With so much stimulus being offered, there is a lot of free money available from the government.  In fact, the United States hosts a website called Grants.gov, which is a one-stop shop for everything grant related and the federal government.  Grants can range from a few thousand to hundreds of thousands, depending on the topic and project.

It is important to remember that getting a grant can be a long process.  It is important to build relationships with the grant giving organization, and leverage that to benefit your start-up, and see what other potential opportunities can be harvested.

Friends and Family

While it may not be the ideal financing option, friends and family can usually be relied on to commit small amounts of capital to family start-ups.  When pursuing this route, make sure that you still document and treat all family loans as if it was from a bank.  This will keep keep the work/life balance in check as much as possible.  It can also spell out what happens if the business doesn’t succeed.  Families tend to be more forgiving in this than traditional funding sources.

Micro Loans

Microlending has become very popular in the last few years.  These have become mainstream through sites like Lending Club and Prosper, which allows individuals to make micro loans to individuals for various reasons.  Small businesses can capitalize on this by receiving these loans, possibly at a better interest rate than could be traditionally received.  It all depends on your credit score, with the better the score getting you the better rate.  There are a lot of free credit score tools that can help you figure out your score so you know if you will qualify for a good rate on a loan.

The other great feature about these lending sites is that it lets the borrower make a post, which includes the purpose of the loan and other facts.  This sales pitch can really help the borrower attract lenders, and thereby lower the interest rate.