Monday, February 27, 2012

5 Ways to Finance a Startup


There are a lot of steps that go into taking a business venture from an inkling of an idea to a full-fledged operation, but they’ll all be a waste of time if you can’t secure the funds required to get your enterprise off the ground.  And while most people have it in mind to approach a bank in order to get a loan (and indeed this is a good place to start), you may not realize that there are actually many ways to get the cash infusion your company needs, and some of them could offer more than just a decent interest rate and a schedule for repayment.  So here are a few methods you should consider when it comes to financing your startup.

1. Personal Loans  

If you can’t get impersonal banks to help you out then perhaps you should turn to those who care about you.  Your family and friends want you to succeed and if your business proposal is sound, perhaps they’ll be willing to show their regard in the form of personal loans to help you get started.  Of course, treading these waters can be treacherous; failure to repay could result in a breakdown of your personal relationships.  But if you’re confident in your ability to turn your idea into a successful business, then you may find all the help you need on the home front.

2.  Grants

There’s nothing like free money to help you start your business!  Unfortunately, you’re going to be competing with a lot of people for those funds, which means you should hedge your bets by applying for a whole slew of grants.  You can check out Grants.gov or the SBA (small business association) website to get started, but your best bet may be to look for large companies funding grants for related business ventures.

3. Business Partners 

While having a silent partner certainly sounds appealing, the idea that someone will give you the money and then leave you alone to run your operation is a little naïve. No one is really going to just drop cash in your lap and then wait to see what you do with it; they’ll want a say in how their money is managed, and that could mean giving up some control of your operations.  If you’re okay with this scenario, then there’s no reason you shouldn’t look for a partner (or partners).  In fact, you could end up with a partner that compliments you and adds more than just money to your business.  But you have to be prepared to take the input if you’re going to cash the check.

4. Angel Investors

If you can find yourself an angel with deep pockets you’ll be in a pretty good place.  Angel investors not only offer money to people in their industry (and often their hometown) as a way to support entrepreneurship within their community; they also provide mentorship borne from years of experience.

5. Venture Capital

This can be tough to secure and it’s often available only for those that are already in business and need the money to expand.  However, there are some venture capital firms that may work with you if your business plan is just that good (and you have already amassed a portion of the funds needed).  However, don’t expect them to sit back idly while you blow their dough; they’ll want to be involved in every step of the process to make sure their investment is secure

Ref: http://www.virtuosimedia.com/business/startups/5-ways-to-finance-a-startup

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