Starting a new business is exciting, as one or more entrepreneurs find a product or service that they believe customers will create a demand for. The idea behind startups is to create something unique to the market. However, going into the startup business can be stressful if you do not have a plan for how you will finance the new entity. Here are some ways to fund your new startup venture.
Family and Friends
Many startups get their initial funds from family and friends, especially when those people are excited about the product or service that will be developed. When you borrow money from other people to start a business, make it clear whether or not this is an investment that will lead them to have a stake in the business, or if this is simply a loan that you will pay back in full or with interest. Regardless of which route you go, it is crucial that you have everything in writing, from the terms of the loan to how much you are borrowing. This helps prevent any conflicts or misunderstandings down the road, some of which may negatively affect a friendship or familial relationship.
Personal Savings or Credit Cards
Another option to fund your startup is to use your personal funds. The use of credit cards requires special attention as you want to prevent yourself from going too far into debt, particularly before you know whether or not your business will be successful. Consider interest and other fees before signing up for a personal credit card.
Using personal savings is an alternative to using a personal credit card, and can help prevent you from going into debt. Using your own savings can also be a good way to help ensure that you are motivated for your new company to succeed. In addition to liquid savings, consider what other assets you have that you might sell for cash to contribute to your startup.
Microloans
Microloans are loans of a smaller monetary value that are often given to entrepreneurs who are economically disadvantaged or who reside in underserved communities. Microloan lenders especially like to lend to companies that will give back to their communities. These loans typically range from $5,000 to $10,000, which is often enough to assist many startups in getting off their feet. The U.S. Small Business Administration can be a good source to acquire a microloan.
Consider these three ways, among others, to get your startup off the ground.