It goes without saying that, in the world of business, it isn’t enough just to have a one-of-a-kind business idea.
Your startup needs just what every other business on the market revolves around – finances. And, most commonly, you are going to require a business loan in order to get the money that you need to finance your idea.
The trouble for a fresh business is that they can’t actually fill out all the requirements for a traditional term loan, such as a bank, credit union, or an online lender.
Basically, if you are a new player in the game, it’s not really feasible that you can provide years of tax returns, bank statements, and so on.
So, while a traditional term loan may be out of your reach, it doesn’t mean that there aren’t a lot of other ways that you can get the necessary funding for starting a business and making your great business idea see the light of day.
Later on, once your business has successfully landed on its feet, you can start thinking about maximizing profits, and other things.
For starters, in this article, we are going to discuss 7 methods that can help you get business funding in 2018.
Angel investors are basically ex-entrepreneurs and professionals who are willing to fund your business idea because you have proven to them that it’s worth it and they want to see it happen.
You usually need to pass a screening before one takes you up, but if you make them believe in what you have to offer and are convinced that you are going to succeed, then you will most likely get them on your side.
However, in order to truly make this happen, you must have a business plan. Every angel investor will look for quite a high return on investment.
The truth is that young businesses tend to crash into flames, which makes the angel investments lose as well.
This is why every professional investor of this kind will be looking for a startup that will return at least ten times of how much they have originally invested in the next 5 years, and have properly set up an exit strategy.
While angel investors look for startups to finance, venture capital firms are more after businesses that are already somewhat established in the field. Or, it could be someone that they are already familiar with.
This is why venture capital is harder to get. The essence of this kind of financing is a person that recognizes that your idea is something truly unique and worth investing in because it can generate significant ROI quite early.
A venture capitalist will usually take the role of being a manager in your company. This way they will do more than just provide you with finances – they will offer their skillset as the means to see your business come through.
In both cases, you should have a lawyer to back you up. As for where to find them, do as much networking as possible. Or, you can check AngelList.
An increasingly popular and easily approachable option for business funding is called crowdfunding. It’s all about getting together a community that is hyped about supporting you.
Essentially, what you’ll be doing is outsourcing what a contractor would do to that very community, by openly asking them to help you out.
One of the best websites to try out for this purpose is Kickstarter.
Each crowdfunding site has its own rules, but the basics are pretty much the same – you pitch in your idea, determine a particular fundraising goal, and set up a deadline.
People will see your page and decide whether they want to join the community that supports you, and in return, you will reward them in various ways. How much each and every member of your crowdfunding campaign inputs into your project directly increases the value of its results and offerings.
While a contributor to your campaign can play the role of a donor, you can also decide to make them into stakeholders who are going to improve the chances of your project succeeding.
Your community is generally motivated by the desire to see the final product, but also by the rewards, the social interaction with you, and the early access that enables them to have a more direct impact on what the final product is going to be like.
Finally, crowdfunding sparks word of mouth marketing, as your community is certainly going to talk about your campaign and idea elsewhere and attract new followers.
Another way that you can get the necessary finances is via social media networks. It’s a trend which is becoming a solid alternative to the previously discussed crowdfunding.
One of the largest and most popular social networks, Facebook, has its own personal fundraising option that you can go for. It provides you with the chance to connect with similar interests, or those that are committed to the same environmental or social issues that you are.
Of course, you can also opt for Twitter and rely on its hundreds of millions of users who actively look for new posts in real-time. If you’ve got a lot of photographs and videos that can spark a community to support you, you should choose Pinterest.
The great thing about social media funding is similar to crowdfunding – you get financial support from fans, who will also suggest their own ideas, and help shape your project into its best possible version.
Furthermore, they will spread the word about it, and bring more people into your community.
On the other hand, you can post on a social media website such as Steemit, which will pay you for every upvote that a post or a comment of yours get. This is basically another reason that justifies the use of social media for business.
Of course, there is always the option to look for financial help from the people who are close to you – your family and friends.
In this case, you might not even have a fully developed business plan, but you’ll have people whose genuine desire and interest is to see you succeed.
Also, you won’t need any financial evidence to prove yourself to them like you would in case of most lenders. So, you can decide to sell an equity stake, or simply take a loan.
Be careful though, because money and friendship sometimes tend to be a bad mix, so make sure that you can pay back the money that you own.
While you may not need to have your entire strategy on paper, your close ones will surely want to know what they are signing themselves up for. So, even if you are going to have an informal conversation about how everything is going to work, you must let them know about all the possible contingencies and risks.
If you make a deal that isn’t specific enough, there is a large chance that you are going to find yourself in the situation where you are going to seriously damage the relationships that you have with your family or friends when the hard times come.
And hard times tend to come, and you must make sure that both you and the people who helped you out are ready for them.
When it comes to banks, they require a credit history, and other items that you, as a young business, do not have.
What you can opt for, however, is a microloan, which consists of an amount from $500 to $35,000. While a bank won’t bother with such small loans, microlenders – smaller, non-profit organizations – will.
A microlender won’t ask for as much documentation from you as a bank would, and their criteria are usually a lot more flexible.
While they do often charge a bit higher interest rates, they are a good solution for a startup to bridge that capital gap and be able to launch their business and see their ideas come to life.
On the other hand, you might want to take a big leap, and try to ask a big company to sponsor your business.
While this sometimes tends to be a hard task, in reality, there is a great number of companies that would really want to sponsor you if you truly have a unique and valuable business idea.
The reason behind this is the fact that a great number of companies wants to expand, and what you’ve got may be the perfect way for them to do so.
Therefore, all that you need to do is to see whether a company relates to your idea, and convince them that together you can both grow in the years that are to come.
Of course, you should know that the idea of writing to a company in the form of something like: “You should sponsor my business idea because it is going to be the next best thing”, isn’t the way to go.
What you need to do instead is underline how much the company can benefit from working together with you. They need to know that there is a lot to gain from what you have to offer, and only then will they go above and beyond to help your business rise.
There is a variety of ways that you can find a company that will sponsor you. For example, you can scan the web for particular companies, learn all you need about them, then get their email addresses and write to them.
Or, you can go the old-fashioned way and walk right into their offices yourself, talk to the manager, and let propose a partnership.
Remember that what really matters is that you show professionalism at every step, so that they know that you are truly standing behind every word that you have got to say.
Looking at the whole deal of how to finance your business idea from a long-term perspective, you can acquire the finances that you need by doing the best you can to save money in various areas.
There is a wide variety of ways that you can do this.
For example, you can decide to go green with the space that you are using. The more work you put into making it as energy-efficient as possible, the cheaper the utility bills are going to be.
A great solution is to go for LED products. The best example is LED lighting, which uses up a lot less energy than regular lights.
When it comes to software that you are going to need for a variety of things, such as bookkeeping, presentations, and other things, it is the best idea to go for open source options.
A good place too look for is Sourceforge. Basically, for anything that you might need, you should look for an open source or a cloud version.
There is no need to invest in super-expensive software and servers when you are just starting a business and hoping to finance an idea that will launch you amongst the competition.
Furthermore, advertising is certainly going to be expensive for a business that has just hatched out of its egg, so it would be a good idea to try and advertise alongside other local businesses that you are good with.
Every good business idea needs to get financed, or it will never see the light of day. There are many ways that you can get the business funding that you need, both short-term and long-term.
Next to angel investors, venture capital, crowdfunding, and social media funding, you can also turn to your friends and family for help.
Finally, you can do your best to save money by implementing various practices in the way you run your business, so that in time, you have enough cash to finance what matters the most.
About the Author:
Nick Brown is a blogger and a marketing expert currently engaged on projects for Media Gurus, an Australian business, and marketing resource. He is an aspiring street artist and does Audio/Video editing as a hobby.