Some people dream of becoming entrepreneurs, and have plenty of money saved up, but don't actually have a viable business idea. Many more would-be business owners are faced with the opposite problem: they have a great business idea, but lack the capital to finance it. No matter how unique or groundbreaking your business idea is, it's unlikely to get off the ground without proper funding.
Organizing the funding needed to start up a business is one of the biggest hurdles that every aspiring business owner must pass. This business startup journey is made even more difficult as new and aspiring entrepreneurs are often turned down for business loans by many traditional lenders.
The good news is that there are plenty of alternative sources of funding that entrepreneurs can use to finance their business dreams.
Using Business Credit Cards
There is no doubt that business credit cards are one of the most efficient ways to fund a business startup that any business owner can seriously consider. It is a cost-effective way of financing startups, as they come at relatively low rates. Some business credit cards also offer zero-percent interest promotions, often for a period of 6 to 12 months. Business owners can also build their business credit history if they use these corporate cards in a responsible way.
Using Your 401(k) to Finance Your Startup
A 401(k) business funding strategy can absolutely provide an aspiring business owner with startup funds, but this is a plan that may attract serious restrictions and certain tax implications. If you are not a financial expert, then it is advisable to seek the services of a qualified financial expert before you borrow from you 401(k). Still, if you're currently employed and aspire to start a business, the balance of your 401(k) can be a source of funding.
Crowdfunding is based on raising small amounts of money from a large number of people. This is done mostly through crowdfunding websites such as GoFundMe and Kickstarter. These campaigns may at times rely on the strength of your business campaign, with the business expected to reward supporters in exchange for the investment they put into the business.
Angel investors are generally known to be wealthy and are prominent for having funded many startup businesses. These are people who have deep pockets and can invest in your startup ideas in return for a given percentage of the ownership of the business. Aspiring business owners can take inspiration from the fact that some of the most prominent companies such as Yahoo and Google were helped in their early stages with angel investors. Some of the sites where you can get these angel investors include New York Angel and Angel List.
Getting Finances from Friends and Family
Unless you have complicated relationships with your friends and family, they can be a potential avenue to finance your startup, especially if they have some cash to spare. Borrowing from friends and family is an interesting alternative to funding a startup and come with some commendable benefits such as low- or no-interest payments, as well as avoiding the hassles that you may have to face in other types of loans.
Some aspiring business owners have financing methods right at their fingertips but don't realize it or aren't willing to make the plunge. If you can bear to part with some of your possessions, selling one of your assets (such as a car) can help you attain the cash you need to start up a business.
Home Equity Loans
Home equity loans allow you to borrow against the value of your home. These are some of the best ways of financing a business startup, as they offer flexible interest rates and can be a low-cost form of borrowing. This is a viable solution for aspiring business owners who are homeowners with equity.