6 Ways Start Ups Can Get Financing

There are several ways that a start-up can get financing for their business, but which you choose depends on your needs. Here are the options at your disposal.

Bootstraps

Like it or not, the smartest and perhaps most common way to get financing is to use your own resources. There’s no interest, and no terms. You may think “but I’m broke!” However, most of the time, these funds are probably not going to come from personal savings, but from liquidating assets, cashing out investments or perhaps even charging to credit cards (though this isn’t recommended).

Friends and Family

The smartest way (financially) to get financing is from relatives or people that you know very well. Yes, it can be awkward to ask, but the rewards are well worth the risk. The only downside is a personal one – money can ruin family and friends. Therefore, it is very important that you get everything in writing, so that there are no misunderstandings between you and anyone you love.

Banks

The third way to get financing is through a bank. Most of the time, this is not going to be possible, since most banks will not give a loan to a business unless it has shown promise for two years (meaning profits). This is mainly because they are going to need something that they can use as collateral. But if a company can prove that they can pay for the loan through the small business administration, then the bank will be much more likely to grant a loan, so look into this!

Grants

The fourth way to get financing is with a grant. If your business has anything to do with technology, then there are a lot of different research grants you should consider. There are also some government grants that you could get if you are a woman or minority. Furthermore, the rewards here are two-fold – a lot of investors are going to be more willing to give the business money if they see you have won a grant.

Venture capital

Consider getting financing through a venture capital company. This is highly unlikely to be successful, because they generally do not like to invest in any type of start-up, but if you have a good track record or perhaps have been on the go for a year already, then you could definitely find some promise in venture capital. The most important thing here is a strong, solid business plan.

Customers and Suppliers

The seventh way to get financing is through some of your potential customers and suppliers. Sometimes customers will be willing to invest in your company, as long as you will customize some of your products for them. A business might also be able to get suppliers to hold a certain amount of the inventory that you need for you, but this is only going to be as long as you promise that you can pay them by a certain date. Still, worth a shot!

 

This is a guest post by Jamie King.

Jaimie King writes about business, finance & more at www.termlifeinsurance.org.

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