Ten Ways to Raise Startup Funding
Year after year, promising businesses fail to get off the ground because they lack capital. Unfortunately, strong leadership potential and good ideas aren't enough to pay for construction, salaries, and other costs associated with running a business—that takes actual dollars. But don’t let that discourage you. There are plenty of tried and true methods for raising capital. To help out, we've compiled a list of ways to get funding for your new business.
- Maintain a second job. This won't be appropriate for all types of businesses, but thousands of small businesses have started out this way over the years.
- Consider asset-backed loans. It's scary to put your trust fund or your children's or your brand-new car up against an unproven business, but if you're confident about your ideas, it can be an excellent way to get funding at a competitive rate.
- Get a CSBFP loan. The Canada Small Business Financing Program offers a number of different loans and programs for business owners. Provincial governments have similar programs you can look into.
- Consider getting a cosigner. If you have a close friend or relative who is more creditworthy than you, consider asking him or her to cosign. Be aware that this is a sensitive issue for many, so be extremely gracious and offer as much information about the business as possible.
- Use your credit cards. Credit cards are flexible, they offer rewards, and they're relatively easy to obtain. If your needs are within your available credit, there's no reason not to consider them as a source of funding.
- Ask family to invest. You may need to offer a share in the business or a competitive interest payment to sweeten the deal, but family funding has been an important component in the development of many successful businesses. Just make sure that you keep things professional by documenting your agreement.
- Seek out venture capital. Note that venture capital is typically best suited to industries with a large amount of human or intellectual capital and the potential for high returns. Biotech and computer companies tend to do especially well with venture capitalists.
- Consider Micro lending. For small capital needs of anywhere from a few hundred dollars to a few thousand dollars, micro lenders can come in handy. Use “micro loan” as a search term when looking for them on the Internet.
- Create a strategic partnership. Network in your community and inquire about people who may have invested in businesses previously. Often, those with excess funds to invest may choose to partner with entrepreneurs to fund new businesses.
- Contact your bank. With so much focus on less traditional forms of financing, many entrepreneurs overlook their local bank completely. If you have exceptional credit or a business that involves tangible assets that could be repossessed, you may have good luck with a bank.
Remember, this list doesn’t come close to covering every option. In fact, there are as many different ways to fund a business as there are to run one. By exploring different avenues and considering what you have to offer your financier, you'll find that nearly any business can be funded. Be creative, be persistent, and good luck!
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