How Startups Secure Funding
A financial boost is especially important for startups. However, loans are the hardest to secure for new ventures with an unproven track record. Here are a few ways new entrepreneurs have gotten the necessary money needed to launch their businesses. Small Business Loan The best place to start is financial institutions offering small business loans backed by the U.S. Small Business Administration. These loans help entrepreneurs at every stage of business, including startups. Lenders approach each financing opportunity by looking at the level of risk involved. They want to be confident your business will succeed and the loan repaid. To increase your chance for approval, include a detailed plan with your business model and growth strategy and any assets or collateral. Your personal credit history is also examined, and, unfortunately, you can be turned down if you have bad credit. Grants A small business grant is hard to find but worth the effort as no repayment is required. Grants are generally industry-specific, and you need to tailor your application to align with the sponsor's goals. Angel Investors Angel investors are wealthy individuals who provide startups with the necessary funds in exchange for a percentage of ownership equity. A solid business plan is required to convince the investors you are committed to success. They particularly love to fund companies that are successful side hustles of the entrepreneur. Venture Capital If you have prior experience and proven skills in your chosen line of business, seeking out a venture capital firm for startup funding is a great option. This form of equity financing allows you to launch without debt. Your business is evaluated on your revenues and pre-money valuation, so be prepared to include that information in your pitch. Personal Loan If you have a solid personal credit history, your chances of receiving a personal loan are high. These types of loans offer no hidden fees, lower interest rates and easy repayment terms compared to a business loan. However, keep in mind you are responsible for repaying this loan whether or not your business succeeds. Family and Friends If you cannot find funding from any other source, consider reaching out to your family and friends to become investors in your new company. Be sure to keep them updated on your company's progress, just as you would do with any other investors. Check out one or more of these funding sources for startups when you are ready to launch your new business venture.