Realistic ways to fund your startup

Borrowing huge amounts of money to fund your startup might turn out to be an unwise idea. FILE PHOTO

What you need to know:

  • Organisations or government sometimes offer grants to small businesses that are run by women, veterans or youth.
  • Let us face it; unless you have an incredible idea and a strong business history, you are probably not going to make it.

You do not have to break you back while looking for money to fund your startup. A little research coupled with some reading will do you wonders.

Investing in a small business has and most likely will always be one of the most popular ways individuals and families begin their journey to financial independence.
When you have a great business idea, funding is always the sticking point. It’s a great idea, after all, but how can you raise the money to get it started?
Finding an investor is harder than ever. So how can you get your business off the ground?

Friends and family
Borrowing money from friends and family is a classic way to start. While it may be harder to convince investors or banks, your family and friends often believe in your dream.
They may be more willing to help fund your company. However, borrowing money is a quick way to lose friends and sour family relationships. Be careful if you decide to proceed this way.

Small loans
Some banks specifically offer loans to small businesses, but banks historically are careful about giving money to small companies.
It can be difficult to qualify. There are alternative lending companies, however, who may be better equipped to help you get your business off the ground.
However, some of those alternative lending companies are predatory. Make sure you know who you are borrowing from before you sign on the dotted line.

Trade equity or services
In virtually every city, there are communities of fledgling business owners who can work together. However, Trading services or equity can be an awful way to make a living, and so not everyone is willing to do it. Don’t be offended if your number one choice says no way.
Bootstrapping
One of the most common ways to get a business up and running is through “bootstrapping.” Basically, you use your own funds to run your business. This money may come from personal savings, low or no interest credit cards, or mortgages and lines of credit on your home.
However, if your business doesn’t succeed, you may have a substantial amount of debt that you now need to manage.

Incubator or accelerator
Business accelerators and incubators have sprung up, particularly near colleges with a strong business programme.
These spaces are part communal workspace and part mentorship development centres. Young businesses can get a great start here while partnering with some amazing people.
However, they are often focused on tech-heavy businesses, so you might struggle to find one that works for your company.

Crowdfunding
If you have a good idea and you are great at social media, crowdfunding might be an option.
When websites first started, there were a number of businesses that had great success pulling together funding through their reach.
However, the lots of companies aim for crowdfunding, so they have to generate a lot of buzz to make it through the overall signal noise.

Small business grants
Organisations or government sometimes offer grants to small businesses that are run by women, veterans or youth.
However, check carefully to make sure you won’t need to pay the money back, or agree to certain conditions down the road.
Not all grants have stipulations, but it’s good to know what you’re agreeing to before you accept the funds.

Get a job
This is the suggestion no one likes. If you currently have a job that is meeting your expenses and letting you live a relatively comfortable lifestyle, don’t be in such a hurry to quit your job and follow your business dreams.
Spend some time getting the business off the ground and building through the early, difficult phases.
This lets you build your business with fewer compromises, and lets you stay true to your vision without needing to give in to financial pressure.
However, it is possible that you will miss opportunities by focusing on your job and running your company as a side business.

Participate in local contests
Let us face it; unless you have an incredible idea and a strong business history, you are probably not going to make it.
Therefore, contests are a great way to source funding and as also a great way to practise your pitch for other investors.
But be sure not to invest a lot of time into a business plan and investor presentation.