You might have dreams to start your businesses and might have worked upon ideas to set it up and get it running. However, if you don’t have enough funds to kick-start your project, your dreams will remain dreams.
You will be compelled to cut off the wings of your aspirations and try for other sources of income.
Are you facing obstacles in finding financial support for your startup projects?
The following tips will help you to some extent to get people to be interested in your project and invest in the same.
1. Crowdfunding
This is one of the latest concepts in the field of raising money for startups. Through this, you can raise small amounts of money from a large group of people, once you make your presentation to them and keep them interested.
You can advertise your business on social media effectively or approach professional crowdfunding organisations so that they advertise your campaign on a large scale. When your project’s visibility increases, you will see a steady increase in the number of investors as well.
However, you should remember that people will invest in your business only if they are awarded in some way.
So it would work wonders for you if you could announce some freebie offers from your business (free passes for a movie, free T-shirts, etc.) for people who invest more than a specified amount in your business. This way, you will experience a win-win situation for your business and investors.
2. Venture Capitalists/ Angel capitalists
Venture capitalists and angel capitalists have been in the business of funding startups for a long time now.
Approach reputed venture capitalists and present your business case in the most professional way possible, so as to attract them and convince them that you are capable enough of running the business successful.
You should remember that before you take up your case with these venture capitalists, you should have drafted a near-perfect business plan with all valuations, capital requirements, assets, expenses, liabilities and everything else in place.
If you have a good credit score (that is, if you have been paying your credit card bills, loans, and other payments properly in the recent past), you will not face any major hassles in getting funds from venture capitalists.
You should submit all documentation related to the business and your financial capacity so that these venture capitalists are convinced that you would be able to turn your startup into a profitable one.
3. Family and friends
Family and friends should be your first sources of reference when you are looking for funds to get your small business running. However, since close relationships are involved, you will have to handle this in a delicate manner.
Discuss your business plan openly with your family members and let them know how you plan to run the business. They have the right to know when you plan to break even and when you plan to earn profits.
It is highly recommended that you put all the terms of the financials in writing and get it signed by all the members who have agreed to invest in your project.
Keep paying interest to these members, just like how you pay interests to banks and other financial institutions.
This is to keep yourself safe from all kinds of unpleasant controversies later on. More often than not, being honest and transparent with your family and friends can get you enough funds for your business.
4. Micro-loans
If you are planning to start a small business, a micro –loan will suffice to get your business up and running. There are many money lenders, small financial institutions and online lenders who are ready to provide micro –loans to deserving candidates.
However, you need to note that in this system, there is no defined rate of interest. Each lender has his individual terms and conditions when it comes to interest charges and therefore, you can be exploited if you are not careful.
The main positive feature of these loans is that they are easily disbursed without entrepreneurs having to wait too long for getting their documentation approved.
5. Business Loan
You can submit all relevant details about your business, its financial requirement, potential, challenges and solutions in a document and prepare a professional business plan to be submitted to banks for business loan purposes.
Startups come with an inbuilt risk of no previous experience; therefore, not many banks may be willing to provide business loans for you.
You should be prepared to face rejections in this department. However, when you incorporate a strict business plan and cover all the permutations & combinations that you might encounter in your business so that it becomes easy for the banks to value your projects correctly and approve loans for the same.
6. SBA approved loans
More often than not, banks may be reluctant to approve your request for business loans.
So, you a first approach SBAs (Small Business Administrations) in your locality and explain to them about your business and how you plan to take things forward. Once the SBAs are convinced about your project, they can give you a letter of approval or recommend your project for a loan.
When your business is backed by professional SBAs, it adds more weight to your business and helps you get loans faster.
7. Self-funding
If you have some savings from your previous income, or if you have any jewels or personal assets that you can pledge/sell for the sake of your business, you need to make use of this so that your dependability on external sources comes down to a large extent.
However, you need to remember that it is not recommended to pool all your savings into your project, even if you are mighty passionate about the same. Running a business comes with lots of challenges that you need to take into account, before proceeding with the same.
You need to foresee critical situations and emergencies that may arise in the future, for which you may need a considerable sum of money. Therefore, always, keep one part of your savings to meet these crisis situations.
8. Cutting down expenses
When you cut down your business costs, you are indirectly contributing to the growth of your business.
You should allow your business to settle down and then turn into a profitable venture before you start investing in luxurious facilities like brand new equipment, swanky offices, state-of-the-art infrastructure and others.
Always start off with used equipment/furniture that you pick up from online stores so that you don’t have to invest heavily in these items. You can use them for more productive purposes like running costs of the business.
9. Using credit card judiciously
Once you have drilled down the equipment and supplies that you need for your business, you can use your credit card to make these purchases, so that you can get some relief from paying these in cash. However, you can make use of this facility, only if you have a good credit score.
Else, banks may not allow you to use your credit cards for large amounts. Another advantage of having a good credit score is that you can take loans on your credit cards during emergencies.
The downside to this is that you have to pay a large amount as interest when you take loans on cards. Nevertheless, the good point is that your loans are disbursed quickly.
10. Mortgage your property
One of the most common ways to get money for your projects is to mortgage your home and apply for a home equity line of credit. What this means is that you can submit your property documents to the bank and get loans worth up to 75% of your property’s value.
However, there is a huge risk associated with in this mode of getting money. If your business crashes, you will never be able to take back your property, and the ownership of the same will be transferred to the bank forever.
11. Online lending sites
With the advent of technology, today we see many online lending sites that offer quick loans easily to borrowers. All you need to do is to visit these sites, register in them, request for a loan amount and choose your term of payment.
You can submit documents online, get them verified within 24 hours, get rid of long queues and wait time and find the loan being credited to your account within 3 to 4 days. However, there are two important points to note here.
One is that these loans are provided mostly for small businesses only and the second is that the interest rates & penalty charges here are quite higher than those charged by banks.
12. Accelerators and Incubators
If you are looking for funds for your startup projects, you must have heard about the concepts of accelerators and incubators. Accelerators are those that are involved in your projects for a short time and invest a specified amount in your company.
In return for their services and guidance, they expect a specified rate of commission from the profits that you make. Incubators, on the other hand, offer more of a mentorship service for a long period and help you in all professional matters other than money in most cases.
13. Spending wisely
When you want to save money for your projects, you have to cut down costs in all aspects of your life.
Know where to draw the line when it comes to enjoying and wasting money. You need to cut down on eating out, electricity expenses and all other household expenses so that you can save a good deal of money, which can be routed to your business.
While it is recommended to lead a frugal lifestyle, you should not hesitate to spend for your essential comforts. In a nutshell, you need to know the difference between luxuries and necessities, so that you can make the right decision.
14. Rental equipment
Sometimes, even used equipment can burn a deep hole in your pocket. Therefore, you need to do considerable research on the internet to see if there are rental agencies in your locality, from whom you can buy equipment for rent for a specified period.
You can keep paying rents weekly or monthly until your business picks up and you can afford used tools at least. With lots of business opportunities in the recent past, people put up their tools for rent on the internet.
You need to search properly to find some good deals and those that provide you flexibility to pay rents at different time intervals.
15. Work part-time
The world is full of opportunities for people who try properly. You can take up various kinds of part-time work opportunities in a way that it doesn’t affect your health and keep saving a good amount of money to be used for funding your business.
You can teach kids during the evening hours or indulge in some freelance work (according to your skill set) or do whatever that interests you to make some quick bucks. Even before you know, you would have saved a good deal of money to be used for your startup projects.
Irrespective of the source you choose from, you need to believe in your dream project first, so that you can convince investors accordingly. While it is easier to convince family, friends and online lending sites, you will face lots of challenges when you try explaining about your project to professional financial institutions and venture capitalists.
Therefore, you need to have a detailed business plan in place that explains about the valuables of your business in such a way that investors feel that your project is worthy enough to put their hard-earned money in.
Small business projects attract loans easier than bigger projects; this is because the risk involved in the former is far lesser than the latter. When you start off, you should always aspire to start off small and then aim for developing it further.