Starting a business can change your life, and you may be eager for the change. Being able to follow your passions as the owner of a small business is a dream that many budding entrepreneurs share. However, even if you have a great idea for a start-up business, you’ll still need to raise capital to realize your dream.
For newer businesses that don’t have an extensive credit history, alternative financing might be a solution. When traditional loans aren’t the best fit for your situation, some of the following suggestions may be worthwhile to consider.
Keep Your Day Job
In many cases, working a regular job as you launch your start-up may not be feasible, but it can be worthwhile if you can manage it. By keeping your job, you’ll have extra income to help you save up the capital you need to either launch your business or keep it going.
Some start-ups can be entirely financed this way, eliminating the need to borrow money. In this type of situation, you can avoid building the debt that could make it harder for your business to thrive.
Borrow From Friends and Family
The second best way to build capital for your start-up is to borrow money from those you know. Since your loved ones are more likely to believe in your dream, it may be easier to get loans from them than it would be to get approval from a traditional lender.
While this may be a more casual type of loan, it’s still a good idea to create a formal legal transaction. You and your lenders should get legal advice and have legally binding contracts drawn up for each transaction.
Get a Business Microloan
A microloan is a little easier to get than a traditional loan, which makes it desirable for first-time business owners and new entrepreneurs. It’s limited in size, restricting borrowers to $50,000 or less.
There are fewer restrictions on this type of loan, so you can use it for almost anything. It can be used to start a new business, or it can help a business owner upgrade their existing business. Microloans aren’t offered by every lender, but you can learn more about them by contacting the Small Business Administration.
Raise Capital Through Crowdfunding
Entrepreneurs with a talent for marketing do best with this option, since there are so many creators, entrepreneurs, and small business owners using this type of opportunity. Unless you know how to attract online followers, your crowdfunding page will get buried under hundreds of other pages.
It’s up to you to do your own marketing, so using your own blog, social media sites, and other marketing options will help you attract people interested in supporting your start-up. Just be sure to read the terms of service for each site first. Fees vary greatly between the different platforms, and some platforms won’t pay you unless you reach your goal, so be careful which sites you use.
Seduce Some Angel Investors
This is what most people think of in terms of raising capital for a start-up. It involves going to meetings with potential investors and showing them the merits of your idea. You’ll have to be charismatic and outgoing, since you’re basically trying to sell them on your idea.
You’ll also want to add some experience, so, if you’re new to your field of interest, it helps to have a seasoned partner. You should also be educated on your product or service. Angel investors will ask plenty of questions before they decide whether or not to finance your idea.
There are many more options for raising capital, so don’t feel defeated if these suggestions don’t work for you. Every situation is different, so there’s not a one-size-fits-all solution to financing every business. It may take a series of trial and error, but you’ll eventually find the right funding option for your situation.