Getting the funds needed to get your start-up off the ground is quite daunting as it can be a difficult and stressful task. The early days of a new business venture can be shaky, and that initial boost of capital feels almost impossible to nail down. You may currently be working from home or coworking, but eventually you will need a physical office space to house your equipment and employees which can become costly.
However, there is help out there and there are lots of different ways to raise the necessary money including;
- Friends & Family
- Business Partners
The most direct way to acquire funds is to take out a loan but there are a few things to consider before you do.
Firstly, make sure you’re getting the best deal you can. Have a shop around different banks and lenders to check what options are available to you. Check reviews and don’t get caught out by a predatory business.
Secondly, remember that both local and national governments often offer loans and incentives for new business to promote growth. These may be industry specific, so investigate to find out whether your start-up qualifies.
Finally, some of the best loans are almost like a job interview. You’ll have to prove to the lender that your idea is worth their investment and that they stand a good chance of getting their money back. Watch out for lenders who don’t seem to care about the viability of your idea, as that may be a sign of someone happy to bleed you dry whether you succeed or not.
If you’re confident in your idea, and you should be, then getting investments from friends and family can be a good idea. As the relationship of trust is already there, you don’t need to worry about shady investors and you are much more likely to find a sympathetic ear.
However, it’s important to remember that your relationship with those closest to you extends past the scope of your business. This can result in issues from both sides, with people believing they have more of a claim or say in your business due to your personal relationship.
Think about the potential damage that can be caused to those relationships if the business fails and the money cannot be recouped. Balance these problems by not relying heavily on friends and family, and only using them as an important but restricted resource.
Instead of finding different investors, you might find just the one. Someone with the needed money might like your idea enough to agree to a partnership and supply the funding needed to get you off the ground.
The benefits of this method are that the money is drawn on as-needed basis, rather than in a large lump sum, by someone as invested in the day-to-day running of the business as you. This allows for a much tighter budget control.
Having said this, the drawback to this method is that you will be giving your business partner a big say in how the business is run, and in future profits. There are many stories of the original partner being ousted once money starts coming in, so make sure that your business partner is someone you trust, and that any contracts or paperwork involved share control and protect both parties.
Crowdfunding platforms such as Kickstarter are an inversion of the regular investor process. Instead of getting a few large sums of money invested from a small number of people, crowdfunding draws many small donations together from a large number of people online.
The process is simple: set up an attractive-looking pitch and try to get as many people as you can to see the link. This method has varying levels of success as the attention of online groups can strike like lightning, or not at all. You will most likely have to offer incentives for people based on the amounts donated, ranging from pre-orders to company equity.
When looking for funding, it is a good idea to use different methods. This stops you from relying on one source of capital that may dry up, and it can help keep costs low. Crowdfunding, investors (both personal and professional), and loans can all play an important role in getting your start-up off the ground.
If you’ve like this post, then why not also check out our post about ‘Saving Money as a Start-Up’.