The pandemic caused many business closures, and more are on the way. Still, many intrepid entrepreneurs have ideas that they feel they can sustain, even in the current climate. They won't let Covid-19 get them down, but they need funding to get their company idea up and running.
Let's say you're in this situation. You feel strongly that you have a winning idea, but you need the money to launch it. We'll talk about a few popular fundraising ideas in the following article.
Bootstrapping
The first thing we should mention is that finding funding is often not as difficult as you might imagine. It's not like trying to explain the true single sign-on concept to someone outside the IT field. Finding funding is seldom all that tough: launching a successful, profitable company once you get that money is the tricky part.
You can use bootstrapping as the start of your journey. Bootstrapping basically means scraping together all the money you can by using your personal funds. If you feel passionate enough about your business idea, you might cash in your IRA or 401K. You will have to pay a stiff penalty to do so, but you'll still get most of that money that you can use.
You might have money in checking or savings accounts. You can use that, and you can sell off anything you feel like you don't absolutely need. Maybe that's your car or some antique jewelry.
The point is that you're trying to get together all the money you can before you look into options like loans. You'd better be sure you have a solid idea, though, since bootstrapping will likely take away all or nearly all of your available cash.
Take Out a Loan
Taking out a business loan is probably what makes sense for you to look into next. You can approach banks or credit unions. These are reputable entities that like to finance startups if they feel like you have a business plan that makes sense.
You must do a bit of research to see which entity you should approach. Maybe you learn from online reviews that some banks or credit unions offer better interest rates and longer payback times than others on business loans.
You can also make sure you have a reasonable business plan that you can take to the bank or credit union rep who meets with you. If you have a vague idea without a concrete plan to back it up, you will probably not secure that loan you want.
Get the Money from Family or Friends
You might think about approaching friends or family members next. This is an option for some would-be business owners and not so much for others.
Frankly, who you know and how much money they have will determine whether this plan makes any sense. If you have a millionaire uncle who loves you very much, then asking for a business loan from them is not a bad option.
On the other hand, if you know that your relatives don't have very much money and they're struggling to pay rent or keep up with the mortgage, it's best to look at other options. You should keep in mind that even if you have a friend or family member who could be willing to lend you the amount you want, the money can strain your relationship.
If it takes a lot longer for you to pay it back than you thought it would, or if you can never pay it back, your familial or friendly relationship might never be the same. Consider whether it's worth it to get the money that way.
Talk to a Venture Capital Firm
Venture capital firms are another option in many cases. You probably know what they are. Venture capital firms are groups of individuals who pool their financial resources. They exist so would-be business owners can approach them to ask for loans.
If the venture capital firm gives you that loan, they expect you will pay them back with interest. This option can work for you in some instances, but you need to realize that you're essentially putting your future on the line to chase your dream.
If your business fails, you still need to pay back that money. If you take this shot and miss, you might spend the rest of your life trying to pay back the initial loan, plus whatever interest has piled up over the years. Think about that very carefully before moving forward.
Talk to an Angel Investor
Angel investors are not very different from venture capital firms. Crowdfunding and bootstrapping might only get your idea so far since you still need additional money to hire employees and rent a storefront if that's part of your business model.
Established business professionals with money to lend can get into the angel investing business. Like banks, credit unions, and venture capital firms, they're not lending you the money for no reason. They feel like you have a solid business plan, and they'll lend you seed money to make a profit off of it.
Anyone with a high net worth can be an angel investor. Some individuals who amass vast fortunes get into this business. If your company sounds promising, they might give you as little as a few thousand dollars or as much as millions if they have it, and that's what you require.
There are sites you can look at that list angel investors. Sometimes there are hundreds or thousands of potential investors on these lists. Do some research and see which one is likely to fund your company based on your business model. Some angel investors will only support the tech industry or some other niche.
The chances are high that if you want to get your company off the ground badly enough, you can do it one of these ways or by using some combination. It all starts with an idea and a professional-looking business plan.
