11 Ways to Get Money To Start A Business
Everyone would love to own their own business but only a few try to live their dream. Why? Well, the sacrifice to get the dream is usually very high. So it remains a fantasy for many. But for the few who are ready to go all the way, pay attention to the information I will share in this article. You may be able to get that fund you need for your dream business.
Raising the money for the startup will not stop you anymore. So if you have no debt, a good credit rating or have good equity in your mortgage, you have many options for funding your startup.
How to Get Money To Start A Business
Here are 11 options on how to get money to start your dream business:
1. Personal Savings
Most startups get their initial startup funds from personal savings. But make sure you keep at least a year’s savings to take care of living expenses. Also, you will need to pay your mortgage, insurance and other expenses. And, as a new business, you will not draw a salary from it until it starts making a profit.
2. Family And Friends
If you need a sure way on how to get money to start a business, try family and friends. Collecting money from family or friends can get messy if you delay repaying the facility so draw up an agreement and state the terms of the loan clearly on paper. In the future, this will also guide your repayments of the loan.
3. Banks And Credit Unions
For a startup to get a loan from banks, that startup must have all its documents in excellent condition. Also, it will have a well-written business plan and a clean credit record. Approach the bank that knows your industry well. Also, go to the bank that is known to grant Small Business Administration Guaranteed loans to startup companies. Besides, they demand a lower down payment and the monthly repayments are easier to deal with.
So go to the local Resources webpage on the agency’s website at sba.gov. Moreover, you should show a willing lender, your own capital contribution or equity for the business. And that could make the bank approve the loan faster.
4. Angel Investor And Venture Capital Firms
You could try Angle investors if you are wondering how to get money to start a business. It may be tough to get money from an Angel Investor. But if you show that you know what you are doing and that your business idea is excellent, with the potential to grow big, you may get their support. They usually ask for equity or become part-owners of the business. You should learn more about this option at the SBA’s Small Business Investment Company Program.
5. Economic Development Programs
You can get this type of loan but you may have to provide a special certification to qualify. If you are a lady consider trying to get an official endorsement for your business as a Woman-Owned Business. Also, if you come from a minority group or stay in an economically disadvantaged area, you may receive a special loan.
You should go to the SBA’s Small Business Investment Company Program resources, to confirm if you can follow that route. Also, if you are a Veteran, go to the Department of Veteran’s Affairs and ask the officials to tell you how to endorse your business.
6. Corporate Programs
You could get the support of big businesses especially if you are from a minority group, a disadvantaged business sector or certified women-owned businesses. This is another method on how to get money to start a business. Try it.
You can start by visiting grants.gov for information on over 1,000 federal grant programs that you could use as a startup business. Also, if you are a woman Entrepreneur, you can go to SBA’s Women’s Business Centers around the country for help. Besides, you will get information from the centre, if you want to start a business with a nonprofit or for-profit organization.
8. Crowdfunding And Crowd-lending Websites
These are fundraising websites that are on the internet. They normally raise small amounts of money. You could try them to get some funds to start your business. You can try Kickstarter, it is the top website for raising money. And that is why this method, is on this list of how to get money to start a business.
All you need to do in this case is to send a post of your project idea and video and, put a specific amount that you need for the business, with a target date on the Website. Next, send emails to your friends, family, and colleagues requesting that they share your project idea and ask them to send funding invitations to their friends.
Those that opt-in to donate to your cause will have their payment methods charged by Amazon Credit card. And if you were able to raise the target amount, Kickstarter will take 5 percent. You will also pay 3 – 5 percent to the Amazon Credit card. But, if you are unable to raise the target amount by the deadline, all the pledges are cancelled. Note, that the contributors are not charged and Kickstarter will not receive any money.
Other crowdfunding websites are Rock the post, Indiegogo, and AngelList. All of them have different methods and functions. Visit them to learn more.
There are also Crowd lending websites. But if you get money from these websites, it is a loan that you must pay back. And the interest rate could be as high as 11 to 16 percent. If you like this type of loan, you may try Kiva Zip and Accion websites.
9. Rollovers As Business Startups (ROBS)
You can try the Rollovers As Business Startups (ROBS). In this method, you use your 401K individual retirement account or any other retirement savings, to fund your new business. Also, you will not pay tax or get a penalty by the Internal Revenue Service. What happens is that your account will roll over into a fresh retirement fund, that is now a shareholder of your new business.
10. Home Equity Loans
If you have a huge amount of equity in your home and a credit score of over 700 you can use this method to get a loan. With this method, you get a lump sum that you would repay over a long time at an interest rate of 4.5 percent. Though it is a tough call. But, it is a surer way on how to get money to start a business.
11. Credit Cards
This is the easiest but the riskiest method because the interest rate is usually high on the accumulated balances, that keep rolling over monthly. It is a tough burden for a new company to bear. Moreover, you can get the lowest credit card rate and terms at Bankrate.com and Credit.com.