2023 could be the year that you finally develop the business idea you have been working on. You might have all of the elements in place ready to go, but financing your startup can be a daunting prospect. You might choose to finance it with your own capital, borrow from friends or family or use a funding approach.
Having a sensible approach to getting your money in place is vital. Fortunately there are a number of ways to fund your new business which we will guide you through below.
Borrow From Friends or Family
You might have decided that borrowing from the bank is not a viable option. A common alternative to borrow the money you require that is quick and more informal is to get support from friends or family. Although it can be potentially difficult mixing your business with family relationships, there are ways to make gaining this initial support easier.
Make sure that everything is written down so that there are clear terms of repayment. To prevent any damage to important relationships, ensure that everyone is honest about the expectations of repaying the money and the timeframe. Take time to consider what the potential impact would be should the business fail.
A number of new startups have had great success in getting capital through crowdfunding.
It involves multiple funders donating online to your startup to build the total amount, either lending the money or taking a share in the business. There are great benefits to using crowdfunding resources, such as GoFundMe or Kickstarter, as they can help develop a community of people who are already interested in the success of your business.
“It is a popular way to get your business off the ground,” explains Daniel Tannenbaum, the founder of Tudor Lodge Digital, a marketing agency that works with startups.
“However, with lots of competition you often have to have creative ways to generate interest and convince funders to invest. Having a strong social media strategy is beneficial to gain the publicity you need. Although it can take a while, it could be the best solution if your startup has big growth potential.”
Take Out a Small-Business Loan
A traditional method of funding a business is acquiring a small-business loan. Although it can be difficult to qualify, they remain popular as an effective way of getting the funds you need to get off the ground. A number of lenders have multiple options to meet the specific needs of your new business.
This method does require a lot of research. Consider the interest rates of the loan and that repaying your loan might impact on your money reserves. Also make sure the likelihood of being approved to prevent any damage to your credit score which can arise from declined applications.
Continue With a Day Job
If you are currently in employment whilst you look to start your business, don’t rush to give up this source of income that helps you meet your bills. It can be a difficult time juggling the launch of a startup whilst working alongside it, however it will allow you to keep some financial security and ease some of the pressures that come in the early stages of managing your business growth.
You might not be able to totally focus your time on the new product, but it is important to be realistic at this early stage of your startup journey.
Find Angel Investors
Business angels are individuals who can invest their own wealth into your startup in exchange for a share in your startup. Make sure to have an attractive business plan as this sort of investment can be extremely competitive.
They can have valuable business expertise and can be extremely useful for contacts, but do note you will lose a little control of your business.