When it comes to starting up a new business, the most important step is getting the required amount of funds. Like most startup business owners, you may not be able to finance your venture out-of-pocket. You will need to find ways to finance your startup.
Besides getting help with small business loans, there are several other excellent ways to finance your new business in 2017, and today we will look at some. Let’s get started!
Raise Money from Friends and Family
Done in the right manner, hitting up friends and family is one of the best ways to finance your startup. Make sure you have a formal business plan in place before you approach your family and friends. This should include financial projections and an evidence-backed assessment of when your friends and family should expect their money back.
This helps minimize the chances of distasteful surprises. Moreover, it lets your loved ones know you take their money seriously. Another important thing to take into consideration is how the agreement will be structured:
- Will the money be a loan?
- Are you offering equity?
Don’t forget to highlight the risks involved.
Get a Personal Loan from a Peer-to-Peer Site
Peer-to-peer (P2P) lending refers to borrowing money via an online platform that will match you directly with institutions and individuals. This online technology enables you to quickly reach many investors you would, otherwise, may be unable to meet. Lending club is one of the most popular P2P sites.
It promises to connect you to investors within minutes. However, you must have a good credit to qualify for a loan on a P2P site. Lending Club, for instance, requires that you have a credit score of at least 650.
Raise Money through Crowdfunding
If you are looking to finance a low-budget, creative venture, a crowdfunding site can be an exciting and effective way to raise the funds. You will need to set a goal for how much money you would want to raise over a given period of time.
Then, your family, friends, and strangers can use the platform to pledge money. You should realize, however, that crowdfunding is normally not about long-term financing. It is supposed to facilitate asking for and providing support for single, one-off ventures.
You can provide incentives for pledging. If you are a writer, for instance, you can offer a free book to anyone who gives you $20. While there’s no long-term ROI for investors, it has not hindered over so many from pledging to Plumfund ventures as the Plumfund is one of the leading crowdfunding sites.
Acquire a Microloan
If you can’t secure a loan through a bank to finance your startup, you don’t have to worry; a microloan can come in handy. This is a small business loan that ranges from $500 to $35,000. Where can you get a microloan?
Microlenders offer microloans; they normally work differently than banks. Namely, they require less documentation and usually employ more flexible underwriting criteria. In the words of Connie Evans, the president and CEO of AEO:
“Microloans are really for that start-up entrepreneur or an entrepreneur in an existing business facing a capital gap who needs to secure capital for new equipment or to service a contract.”
To start a new business, you need to have the required funds at hand. In light of the fact that you may not have the capacity to fund your new venture single-handedly, you will need to find ways to finance it. The aforementioned are some of the excellent ways to finance your startup in 2017.