Are you looking to launch a new startup? This can be an expensive process because there will be various startup costs to consider, such as a business premises, equipment, staff, inventory, software, wages, and security, just to name a few important costs.
It is important to calculate your startup costs and then to find a way to reach this figure so that you can get your startup running to a high standard from the very start as this is how you find success early on. There are a lot of good funding options that you can consider, and you could even combine a few to reach the target amount.
- Personal Savings
Personal savings is one option to consider if you have savings tucked away. This is because you do not have to go out and persuade anyone to provide funding. You will also not have to give anything up in return, but keep in mind that it is always a risk. There is no guarantee that the company will survive, and all your personal savings will be lost.
- Friends & Family
Going to your loved ones can be another good option for those seeking funding for their startup, and they are more likely to trust you than an outsider – this may also mean that they ask for less in return and possibly with lower interest rates than you would get from another lender. Of course, borrowing money from friends and family can also be a risk and complicate your relationship, so it is important to make sure that you are both comfortable with the arrangement and have it in writing. It is also a good idea to keep them posted on developments with the business and involve them if they wish.
One form of funding that is on the rise is crowdfunding, which can certainly be an excellent way to raise money for a startup. This involves pitching your startup idea online and then inviting people from all over the world to invest as much or as little as they’d like. You can raise large amounts even with people donating a small amount, and you do not have to go through the difficult questioning that you would get through an angel investor (more on this to come).
Another reason that crowdfunding is a good option is that it gives you the opportunity to promote your startup and generate excitement and word-of-mouth marketing before you have even begun, which could help you to find some success straight out of the gate.
- Business Loan
A business loan is a smart way to get funding for a startup because you can easily receive large sums of money to cover the various costs involved without having to give up equity. There are many different types of business loan to consider, so it is important to speak to a specialist like Biz2Credit, who can determine what type of loan is best for your needs and connect you with an appropriate lender. You will then pay back the loan over a pre-agreed period with monthly payments.
- SBA Loan
Following this, you might find that you qualify for an SBA loan, which is a loan from the federal government, usually to those that struggle to get a traditional bank loan. This is a long-term, low-interest loan that can make it easier to manage repayments.
- Strategic Partnership
There are many reasons why it is a good idea to form a partnership when starting a new business, including the fact that it helps to spread the cost of launching the startup, and it helps to reduce your liability (although obviously profits will be split). This allows you to connect with businesses from around the world, and often, you will find generous terms aremade when forming a partnership. From this, you can create a personal relationship and benefit from their guidance too!
- Angel Investment
Angel investors are high net worth individuals looking to invest in new startups, and they can provide significant financial backing if you are able to persuade them to invest. This is usually in exchange for convertible debt or ownership equity, and you often get more favorable terms when compared with other lenders.
- Venture Capitalists
A venture capitalist, meanwhile, is a private equity investor that provides funding to businesses that have high growth potential for an equity stake. They can be hard to persuade to invest as you must demonstrate the potential for exponential growth, but they can provide significant backing and often will be able to provide you with guidance and support, which will be helpful for inexperienced entrepreneurs.
Another smart way to receive funding for your startup is to ask for an advance from a strategic partner or a major customer. This allows you to use the future success of the company to get up and running which can be an effective and straightforward way to raise funds, but keep in mind that success is not guaranteed so it might be hard to convince a partner or customer and it could take some time before you are able to pay them back.
- Join A Startup Incubator
A startup incubator is an organization that is commonly associated with universities or community development organizations that provide support to new startups. They usually provide free resources, office space, management training, and other services, but they may also provide seed funding so they should certainly be approached when you get started. Even if they do not provide funding, you should find them to be valuable and could help to lower your startup costs.
These are the main ways to receive funding for a new startup and could be combined to reach your total figure. It is important to reach your calculated figure in order to get the operation running to a high standard from day one, as this is how you find success early on and start to build a reputation for your brand.