According to recent studies, over 90% of new businesses fail during the first year of operation. Lack of funding is one of the common reasons for this. Money is the bloodline of any business and that long painstaking yet exciting journey from the idea to a revenue generating business needs a fuel named capital. That’s why, at almost every stage of the business, entrepreneurs find themselves asking- How do I finance by startup?
Below are some funding options that can help raise capital:
- Self- Funding – It can be hard to save but starting with your own money avoids things like interest’s fees and monthly payments. Even ask family and friends to contribute, you never know until you try. I will say this- this option is only suitable if your initial capital requirement is small. Some businesses need a large capital from the start, so self-funding may not be a good option.
- Crowdfunding – Crowdfunding is taking a loan, pre-order, contribution or investments from more than one person at the same time. The best thing about crowdfunding is that it can also generate interest and hence helps in marketing the product or service alongside financing. I recently held a successful crowdfunding campaign through Kiva.com that gained my business $5,000 capital.
- Angel Investors – Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They can also offer mentoring or advice alongside capital. Angel investors have helped start up many prominent companies, including Google and Yahoo. Just be sure to know what your investors wants in return, some may require equity into your business. Here is a list of a few New York City angel investors: New York Angels; 37 Angels; Empire Angels; Jumpstart Angel Network; Tri State Ventures.
- Contest Winning– Recently, there has been an increase of competitions and contests for small businesses. Entering and winning these competitions can gain capital and also increase exposure for you and your brand. I have entered in a few and although my company hasn’t won yet, I gained exposure just from competing. Just google- Small Business Competitions and tons of websites come up
- Bank Loans, Lines of Credit and Credit Cards– Of course, these are the obvious and the route most entrepreneurs take before exploring other options. While these options work and can sometimes be faster than others, it is important to keep in mind interest rates, costs, etc because you can build debt fast which can be detrimental to your business’s credit.
- Government Grants and Programs– Federal, state and local government offer a wide range of financing programs to help small businesses start and grow. If you comply with eligibility criteria, government grants can be the best funding options. You can visit sba.gov and search for grants the best suits your business.
There are many ways to fund your startup or small business, you just have to educate yourself on the best option for you and your business. I have been successful in using these steps and have gained capital as well as exposure for my business. If you don’t know which option is best for you, I suggest investing in an accountant or consultant. Some offer free first sessions which can help with your initial questions and concerns