The Most Popular Funding Sources for New Startups


Guest post by Jane Hurst, http://www.lifehack.org/author/jane-hurst & https://blog.getresponse.com/author/jane-hurst

One of the things that has held many people back from starting their own businesses is funding. Today, there are numerous funding sources for small businesses, and more and more people are setting up their own startups. If you are interested in starting your own business, but you don’t know if you have enough money, there are several options available to you, and you aren’t necessarily going to be in debt to a bank for the rest of your life. Let’s take a look at five of the most popular funding sources for new startups.

1)      Personal Credit – Before you go and take out any high interest business loans, see what you have available to you in your own personal credit. For instance, if you have a low-interest credit card, you may want to use it for some of your startup funding. You can also talk to your banking officer to find out if you can add a line of credit to your bank account, which you can borrow against when you have business expenses. Another option is to ask about a personal loan, which may have a lower interest rate than a business loan or other type of financing.

2)      Seed Funding – If you don’t need a lot of money to start your business, seed funding may be your best option. In most cases, seed funding is for businesses that are still in the idea stage, and a small amount of capital is needed until the business actually starts earning money. It can also help to attract other investors, because they will see that someone else is interested in what you are doing. In many cases, seed funding will come from someone you know, such as a friend or a family member.

3)      “Bootstrap” Funding – If you have any means to fund part of your business yourself, don’t hesitate to use your own funds. It may mean that you can’t enjoy a lot of little luxuries for a while, such as going out for dinner, but the more you can cut back, the more money you can save and use for your new business. You can even sell all of the stuff that you no longer use, and put that money towards your new business. For instance, if you need better tech for your business, sell iPhone7 devices you don’t need and upgrade to newer models.

4)      Angel Investors – There are many wealthy people who are looking for small businesses to invest in, and they are willing to give small loans in order to help fund a variety of startups. There are different types of angel investors. Some simply want to have a certain percentage of return on their investment. Others want to be more hands-on, and will demand to have part ownership of the business. These are often informal deals that are based more on gut feelings than actual statistics, and they are perfect for startups that can’t seem to attract financing from other investors.

5)      SBA Loan – It is always a good idea to apply for loans through the Small Business Administration (SBA), as they tend to have lower interest than traditional bank loans, and they are guaranteed by the SBA. This doesn’t mean that if your business fails, that you don’t have to repay the loan. Repayment is still your responsibility. What it means is that the financial institution that you deal with is not going to be on the hook for the money if your business fails. The SBA offers loans for many different types of small businesses, and is often the best resource for startups.

 


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