Even the smallest of startups may require some serious initial capital. When faced with this problem, most startups go to a bank and apply for a loan. Sure, this is the easiest way, but definitely not the best one. First of all, unless you have a positive credit rating or a really fascinating business plan, the chances are you won’t get what you’re asking for. Luckily for you, there are many more creative ways of obtaining these funds and here are five of them.
Keeping a Day-Job
Unless the nature of your startup is such that it requires your presence 24/7, you might want to think about keeping your day-job. For most people, starting their own company is a way to escape the job they hate. Unfortunately, it might be best to stick around at your workplace at least for a while longer. This way, you can use the salary to finance your startup until it is profitable enough to start focusing on it full time.
Factoring
If you have already started doing business and have the option of credit payment, you might face a peculiar problem. While the money owed to you is technically yours, you need to wait for it to arrive in order to use it. However, sometimes you won’t have the luxury of time. Your suppliers, employees and bills will require immediate payment and, when that happens, you can always turn to invoice funding. This means that you find a factoring company and sell your account receivables to them. This way, you get 80 percent immediately and the rest (minus 1 to 5 percent fee) when these invoices are collected.
Crowdfunding
Another interesting financing method is crowdfunding. Here, you present your business idea to the world and accept contributions from all those who believe in your vision. The ways of doing this are various, but these funds are most commonly collected on the internet through crowdfunding websites. This can be extremely efficient. For example, Pebble Time – Awesome Smartwatch, No Compromises managed to gather over $20 million.
Looking for Investors
A traditional method of starting a business you can’t afford is to look for the people who are willing to invest in you. In order to gain investors, you need to learn how to sell. This time, we are not talking about selling a product, but about selling your idea. This, however, does come at a price. In exchange for funding, you often have to give some equity in your company. Startup owners who want to keep all the control usually avoid this method.
Selling Personal Belongings
Finally, if you have any assets you could sell in order to finance your startup, you should definitely do so. Look at it this way- unless you start working as an Uber driver, the car won’t earn you enough to launch a startup. On the other hand, if your startup hits off, you will be able to afford a new car in no time. Because of this simple equation, most people find it reasonable to sell their vehicle in order to get some work capital they can invest in their business.
Conclusion
Even though going to a bank may seem simpler from a practical point of view, changing interest rates alone, the risk for your collateral and a ton of bureaucracy are the things most people want to avoid. In this situation, what they look for is an alternative and, fortunately, options are quite numerous.
