Having a great business idea and passion is not enough to start a business. For entrepreneurs to successfully start a business, they also need money. Therefore, money is an essential factor of a business startup. Hence, as an entrepreneur, you need to know how to get money to start a business.
Therefore, to lend a helping hand, we will share helpful information that will enable you to know what, how, and where to get money to start your business.
Ways of Getting Money to Start a Business
When starting your business, you have to think of getting money for your business startup.
There are several methods and places you can get money to start your business.
However, before going for any of the several options, you have to be sure that it will work for your business.
With that said, below are the different ways of getting money to start a business:
The first place people think to seek and source money for their business startup is their savings.
So, you can also make use of your savings to start your business.
However, if you want to use your savings as the source of your business funding, you need to ensure that it will be enough.
To ensure that you have enough to finance your business startup personally, you need to plan.
That is, you need to know the cost of your business startup and start saving money ahead of time.
It also means you will have to cut down on your spending expenses.
When you have saved enough, you will be able to finance your business startup.
However, depending on how much savings you have, this funds source tends to dry up quickly.
Hence, you need to have another source of funding to back it up.
Sell Your Assets – Getting Money to Start a Business
This is another way of self-funding your business startup.
Selling your assets can serve as an alternative or a backup to using your savings.
Hence, if you do not save enough money, you can think of items to sell to get money.
For instance, there might be some items that you can live without and that can generate a substantial amount of money when sold.
You can sell those assets and get the money you need to start your business.
Additionally, if you have financial/capital assets such as bonds, stocks, real estate, and so on, you can sell them.
However, when you sell your financial/capital assets, it might attract taxes on capital gains.
Capital gain is the profit you gain from selling capital assets, minus the cost you originally bought them.
Hence, once you sell your financial/capital asset higher than the price you got it at, you will be required to pay taxes on it.
Make More Money
Between saving and selling your asset, there is another way to self-fund your business.
This alternative involves working to make more money.
With this alternative, you can commence your business while working part-time.
However, the job you do has to pay you well while providing you with enough time to start and run your business.
Several entrepreneurs make use of the alternative to fund the startup of their small business.
They do this, especially when they do not have any other way to support themselves financially.
So, while running around to start their business, they work on the side to gather money for the company and themselves.
Borrow Funds from Family and Friends – Getting Money to Start a Business
Your family and friends are people who you can depend on and trust to have your back.
Hence, they can also be a source of getting money to start your business.
When approaching them for this purpose, you should ensure that you do not go without a prepared business plan.
You should also go with your financial plan and other documents needed when getting a loan from the bank.
Make them understand that you are coming from a professional level regardless of your relationship with them.
Additionally, give them a formal presentation of your business idea and plan.
This will show them that you are prepared, organized, and ready to make good of their money in making your business successful.
Furthermore, after making your presentation, you can encourage them to give you feedback.
This will show them that you have respect for the money and their person and input.
As a result, it will make them more willing to lend or borrow you the money you need.
Finally, you should not assume that they will lend you money because they are close to you.
Therefore, you should not take their assistance for granted because of the relationship you have with them.
Most of them will not support you just because of love but because they believe in you and your business idea.
Yes, you can get money to start your business from credit cards.
However, it is a risky alternative.
Most credit cards come with a high-interest rate.
Nevertheless, credit cards offer several benefits and can be quite flexible.
You can withdraw as much as the credit card limits permit or a small amount with a credit card.
You are allowed to pay the money any time you want as long as you are paying the minimum amounts required every month.
Home Equity Loan – Getting Money to Start a Business
If your home has substantial equity, you can go for this alternative.
Home equity is the value of the owner’s interest in the home.
The value of a home fluctuates as the owner keep making payment on the home mortgage.
You can use your home equity as collateral to get a home equity loan.
Banks that offer home equity loans usually allow you to have access to 75% of your house value.
This can provide you with a substantial amount of money to start your business.
However, the disadvantage of this alternative is that your home will be at risk.
In other words, if your business crumbles and you cannot pay off your loan, you can lose your house.
Business Loans from Credit Unions and Banks
This is one of the most sought-after means of getting money to start a business.
However, it is not that easy to get loans from banks.
This is because banks demand several documents to assure them that your business will succeed.
They expect you to have a spotless credit record and a solid business plan before you can be approved.
Therefore, if you choose this alternative, you have to be very meticulous and prepared.
Before choosing a bank to borrow money from, visit different banks and find out their offers.
Yes, banks have a general requirement before giving out business loans.
However, individual banks have their unique requirements and offers.
This is why you need to research different banks before making a choice.
You can start with the banks you are familiar with before going to others.
When you make inquiries, you will know the bank requirement and offer that will work best for you.
It is best to seek a bank that provides Small Business Administration (SBA) guaranteed loans.
This is because, with SBA guaranteed loans, the down payment might likely be lower than other loans.
Also, the monthly payment might likely be easier to pay.
For credit unions, you also need to let them know that you are creditworthy, serious about your business, and will be a success.
Once you have proven this, you will likely be approved for the loan.
When you have fulfilled the requirement for securing a loan, the credit union or bank will ensure that you get it.
Angel Investors – Getting Money to Start a Business
Angel investors are people who invest in startups in exchange for a fraction of the company or business.
These fractions are usually like royalties or equity.
Most of these investors are from the world of business.
However, that might not have been where they started from.
They are often individuals who practice professions such as business, medicine, accounting, law, etc.
Angel investors work by getting involved and investing during the business or company’s early stage.
It can be pretty difficult to get funds from them.
This is because, just like the bank, they expect something from you that will make them invest in you.
When you approach them, they will want you to present a great business idea or plan.
Once they have seen your potential and are happy with your pitch, they will invest in your business.
Additionally, they sometimes offer their guidance and share their experience with the entrepreneur.
The big question is ‘how does one find angel investors?’
Many of these investors choose to stay in the shadows.
Therefore, it might be a little challenging to find them.
However, you can identify them by asking financial advisors or other entrepreneurs.
The few angels that do not stay in the shadows make it easy for entrepreneurs to find them.
They do this by joining organizations for angel investors.
Angels get to meet several entrepreneurs with business ideas to invest in.
However, they do not invest in all.
They only invest in businesses that have the potential to be great.
Hence, if you choose this alternative to get money to start your business, you must be well prepared.
Your pitch has to be exceptional.
Just like angel investors, venture capitals are also in the business of investing in businesses.
They are quite alike, but venture capitals are more structured.
Angel investors are just individuals who invest in startups.
While venture capitals are firms or organizations specialized in investing in startups.
Unlike angel investors, venture capitals have more interest in businesses than entrepreneurs behind the business.
Venture capital firms tend to invest more and demand more control.
Additionally, ventures are more aggressive and engaged when it comes to returns.
Therefore, they are usually focused on getting significant returns.
Hence, they have very high expectations.
Therefore, if you want to get money to start your business this way, you have to be sure that your business has the potentials to make significant returns.
Grant Programs – Getting Money to Start a Business
There are programs that the government organizes to award grants to business owners.
To be qualified for a grant, you will have to meet the criteria for the specific grant you are going for.
Crowd-funding is a way of raising funds for a business from different people.
In other words, crowd-funding happens when a group of people comes together to raise and invest money for a business.
Crowd-funding takes place on crowd-funding websites and social media.
These platforms bring entrepreneurs and investors together.
On these platforms, entrepreneurs pitch their business ideas to the investors.
After this happens, the investors who buy into the idea will start to bring in their investment.
Examples of crowd-funding platforms are Substack, Patreon, GoFundMe, Kickstarter, and Indiegogo.
You can go on to any of these crowd-funding platforms and pitch your business idea.
One benefit that comes with crowd-funding is that it exposes your business to a vast number of people.
Crowd-funding is not only an excellent way to get money to start a business but also a means to promote your business.
However, as wonderful as this means of getting money to start a business is, there are potential disadvantages.
Those disadvantages include crowd-funding site fees and returning funds if you do not meet your funding target.
Hence, you should consider these disadvantages before you go on to any crowd-funding site.
Business Incubators – Getting Money to Start a Business
Business incubators are organizations that work to build new businesses or companies.
They do this by providing financial support, legal services, mentorship, and connections to an entrepreneur.
Most incubators organizations are supported and work closely with venture capital firms.
This is a good way of getting money to start a business and an excellent opportunity to grow fast.
If you opt for this alternative, you need to ensure that your business idea is innovative and has a high chance of success.
This is because incubators mostly go for innovation and potential.
If you choose this alternative, you can check out National Business, Incubator Association, and Idealab.
How to Brilliantly Pitch Your Business Idea to Get Funds – Getting Money to Start a Business
As we earlier discussed, you can get money to start your business from different sources.
These different sources come with other demands and requirements.
However, most of them have one requirement or demand: you need to sell your business idea to them.
In other words, you will have to pitch your business idea.
Therefore, to win your investors over, you will need to give a brilliant pitch.
We want you to secure that investment you need successfully.
Hence, we are going to briefly discuss with you how to pitch your business idea to investors.
Prepare a Presentation
The first thing is to ensure that you give a brilliant pitch is to prepare your startup deck.
Your startup deck is any presentation that gives an informative but brief summary of the idea you have for your business.
Once you have successfully done this, you can move to the next step.
Rehearse Your Pitch
You need to rehearse your pitch if you want to deliver a brilliant one.
Rehearsing your pitch will help you know the right words to say and tell them instead of depending on your visuals alone.
Additionally, when you rehearse your pitch, you will be able to keep things concise and brief.
Be a Storyteller
One thing that captures almost everybody’s attention is a captivating story.
Therefore, if you want to capture your investor’s attention, you have to be a storyteller.
You can make use of an illustration.
Your illustration should be about how your product or service will bring a solution that several people desire.
However, as you tell your story, ensure that you do not stray from your point.
Conclusion on Getting Money to Start a Business
As discussed above, there are different ways for you to get money to start a business.
You can go for any of the options.
However, you have to ensure that they will work well for you and your business.
Here is to your success at getting money to start your business.