When starting a business one of the first questions most entrepreneurs ask is “How am I going to fund this?” Obviously, it’s hard to get started without some form of funding, that’s whether you have a product or service-based business.
There are different classifications of businesses, so to understand how much you’ll need to have to understand what type of business you are starting. According to the U.S. Small Business Administration most micro-businesses cost around $3000, while most home-based franchises cost $2,000- $5,000.
Every business is different. Every entrepreneur’s situation is different however there are some things that all must take into consideration.
What are the bare necessities needed to start your business? Do you need a computer? What about faster internet? Is there certain software needed to run your business?
What are the optional costs? Can you get by using free apps like Canva or Typorama instead of paying for photoshop?
Once you’ve figured out what your costs will be, it’ll be easier to determine what form of funding may be best for you. Below we’ll go over some of the basic forms of funding.
Self-Funding
This is typically the go-to for most entrepreneurs. It’s arguably the easiest and you know its all on you. This could be savings that you have, it could be continuous funding from working if you are still working a job as you get your business started. This is a low-risk form of funding and should be the go-to for the lower cost businesses.
Business Loans
This is a difficult option for entrepreneurs who are just starting out. It’s higher risk than some of the other options because if your business doesn’t take-off or takes a while, you may find it difficult to pay these business loans back. Also, no one likes starting a business in debt. It adds an extra layer of stress, which typically is the last thing most entrepreneurs need. If you are looking to get a loan the best options are usually your local banks/credit unions that you’ve already built a relationship with. There are a plethora of other options as well though, which we will have listed below at the end of the article.
Crowdfunding
This is becoming a more wildly popular option within the past few years, it’s a favorite of mine (partly because it’s the business I’m in) because it’s fairly low risk but also because it provides the entrepreneur the opportunity to validate the market before really jumping all in! What do I mean by validating the market? Well, if you create a crowdfunding campaign and it does extremely well by meeting/exceeding your goal, then you know this is something the consumer wants! If your campaign doesn’t gain much traction, chances are the consumers are telling you “We don’t really want or need this.” And you know not to jump all-in on the idea!
Grants
This is a very difficult option for 99% of entrepreneurs. I typically don’t mention grants because of the degree of difficulty ESPECIALLY for new businesses. It is not only difficult to qualify for these but it is also immensely time-consuming and you should always have an experienced grant writer by your side if you decide to go this route, which can also be expensive depending on other factors.
Venture Capital
This is an attractive alternative if you are looking for an infusion of capital to get your business/start-up funded. VC is typically used for higher dollar amount of funding. If you are looking to start a Micro-Business, VC isn’t for you. We’ve had several articles on VC in the past, so if you’re unsure exactly what it is I would encourage you to check those out. There’s a diverse option of VC deals and each entrepreneurs circumstance is different, so I strongly encourage you to have someone with experience on your team or a consultant who can help you navigate that difficult path.
All of these options have their rightful place in funding your business. As with any other decision as an entrepreneur you need to ensure you are educating yourself on the right options for you and your business. These are just a few of the options that can be available to you, not a complete and comprehensive list.
Business Loans:
• SBA – https://www.sba.gov/funding-programs/loans
• PayPal – https://www.paypal.com/us/webapps/mpp/paypal-business-loan
• Lendio – https://www.lendio.com/small-business-loans/
Crowdfunding:
• Inventrify – www.Inventrify.com
• GoFundMe – www.GoFundMe.com
• Kickstarter – www.Kickstarter.com
• Indiegogo – www.Indiegogo.com
