How To Get Funding for Your Startup

Startup Funding

Starting your own business is a new and exciting time in your life; however, it can feel daunting trying to get enough money to turn your idea into a reality. On average, business owners spend $40,000 during their first year in operation. During this time, many entrepreneurs are still building their companies and aren’t able to turn a profit. This means they need ample liquid capital to build their businesses.  

You have multiple options to fund your enterprise and you might tap into different sources of funding as you execute your business plan. Here are a few financing options to consider and how to secure them. 

How Does Startup Funding Work?

The process of securing funding for a startup varies from one business to the next. A software company or online business might not need as much startup capital as a brick-and-mortar organization that manufactures products. 

A business gets pre-seed funding before it ever creates a product or service. As you start to build out your business, investors and lenders can contribute seed funding to help it grow. Even when your business is established, you might seek out additional financing to expand your presence in the market. 

As your business becomes successful, you will pay back your lenders through your profits. Eventually, you should have enough working capital to fund future products and cover daily expenses without seeking out loans. 

Funding Support for a Startup: What Are Your Options?

There are several channels to consider as you explore your startup funding options. Here are multiple ways to get the money you need through loans, grants, and credit cards. 

Traditional Business Loans

The first option to get the startup funding you need is to seek out traditional business loans. You may need to present a business plan to your creditor and have existing business credit that makes you a trustworthy borrower. Business loans come in a variety of sizes from a few hundred dollars to tens of thousands of dollars. You will pay back the principal of the loan plus interest through a series of agreed-upon monthly payments. 

This is a common way to secure startup funding. However, if you don’t have business credit, you could pay a higher interest rate than you would like. 

Personal Business Loans

Many startups don’t have business credit because they are new organizations. If this is the case with your venture, consider taking out a personal loan for business. You can use your credit and your assets to apply for financing through lenders. 

Personal business loans can be unsecured, which means lenders rely on your credit score, or they can be secured with collateral. You may need to use a significant asset like your car or house as collateral if you are seeking out a secured loan. 

Download the Free Stock Loan Calculator

Your portfolio’s value can be unlocked even if you don’t sell a single share in the open market.

If you haven’t checked it out already, here is a free stock loan calculator to help you size out a loan for your shares.

Simply enter a symbol and the number of shares you own, and you’ll see a potential loan amount that we can fund quickly.

Download the free Stock Loan Calculator now

Small Business Administration Microloans

The Small Business Administration (SBA) will finance startups up to $50,000 through its microloan program. The average SBA loan is around $13,000. You can use a microloan to cover working capital or get your business off the ground. You can’t pay off existing debts or purchase real estate with an SBA microloan. 

Collateral is often required to secure an SBA loan, which means you might need to borrow against one of your business assets. If you have invested in significant equipment or a fleet vehicle for your company, this could be the collateral you need. 

Microlenders

The SBA can also connect you with other microlenders that will help you secure financing for your startup. You can decide whether you want to take out a single large loan for your new business or work with several microlenders to pay off loans over time. 

Venture Capitalists and Angel Investors

VCs and angel investors are people who have money and want to buy into promising startups

Working with VCs has its benefits and drawbacks. On one hand, these investors could be a good source of funding for your business. However, many investors expect to have a seat on your board and a say in your operations. You will have to answer to your investors and act based on their recommendations. That said, this could be a good thing for some startup founders. The investors could keep you accountable and provide insights to help you grow your business. 

Stock Loans

If you are invested in the stock market or have shares in various companies, you might be able to borrow against these assets. Stock loans are secured loans that use your shares as collateral. You are not selling your stocks when you take out one of these loans. However, if you are unable to pay back the loan, your lender will take over your shares.

Stock loans could be a good way to get the startup funding you need without paying excessive interest costs to other lenders. Because stock loans are secured through collateral, you don’t necessarily need a high credit score to get the funds you need.

Use our stock loan calculator to estimate how much money you can access through this option. 

Grants for Startups and Small Businesses

There are funding options that allow you to access money you don’t have to pay back. Along with small business loans, the U.S. Chamber of Commerce has grants for up-and-coming organizations. You can also research state and local grant options to fund your project. Many municipalities want to see small businesses thrive in their region, which is why they set aside grants to help entrepreneurs get started. 

Crowdfunding

With crowdfunding, a lot of people pay a little bit to help a person achieve their goal. For example, if you need $10,000 to launch your startup, you can ask 500 people to contribute $20. Crowdfunding sites like Kickstarter and Indiegogo allow people to choose which projects they are interested in funding, so they can give money to viable business ventures and ideas they are passionate about. 

Some crowdfunding sites allow you to keep the money, while others expect you to pay it back as a loan. The main drawback of this option is that you might not get the funding you need if users on the crowdfunding site aren’t interested in your idea. 

Business Credit Cards

Download the Free Stock Loan Calculator

Your portfolio’s value can be unlocked even if you don’t sell a single share in the open market.

If you haven’t checked it out already, here is a free stock loan calculator to help you size out a loan for your shares.

Simply enter a symbol and the number of shares you own, and you’ll see a potential loan amount that we can fund quickly.

Download the free Stock Loan Calculator now

A credit card is also a viable option for funding your startup. Not only can it help you get your business running, but you can use the card to pay your vendors, contractors, and other costs. Look for business credit cards that have low APR offers and offer rewards like cash back. This can help you save money on your purchases. 

What You’ll Need To Do Before Securing Funding

Many of the lenders and financing options above want to make sure they are providing money to viable business ventures. This means you will need to come prepared with a business plan and a reason for using the funds. Here are a few steps to take before trying to secure funding to increase your chances of success.

  • Identify how much money you need: This will prevent you from over-borrowing or under-borrowing. 
  • Create a solid business plan: Establish how you plan to run your business and review goals like profit margins and operating costs. 
  • Gather relevant financial documents: Lenders might want to see your tax returns, P&L statements, and other sources of financing. This will provide a clear picture of your business’s financial health. 
  • Research different funding options: Identify which choices will support your business best. Look for affordable funding options and grants that you might not have to pay back. 
  • Have a plan for paying back borrowed funds: Startup funding isn’t free money. Respect your loan terms and investor agreements so you pay them back on time. 

Regardless of the industry or nature of your startup, you will need to understand the basics of finance to run your business. Consider taking a basic accounting class or working with a financial advisor throughout the development process. This can help you make sound decisions that will increase your chances of turning a profit.


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *