While the world has suffered a commercial crisis, causing thousands of businesses to shutter, the pandemic has also triggered a huge increase in business startups.
Many budding entrepreneurs and those pushed into a change of career have taken the leap into new business ventures. Indeed, Forbes reported last year that the pandemic had fueled a global growth of startups, with figures significantly surpassing initial forecasts.
Getting all these businesses off the ground requires some capital, however, and this is one of the key challenges new entrepreneurs face.
So, we wanted to provide a few suggestions as to how you might be able to fund your startup idea if you’re looking to grow a business of your own.
Your first port of call should be researching what government or charity-funded grants are available to you, as this kind of financial assistance doesn’t require repayment.
This route isn’t accessible to everyone, and there will generally be specific criteria you have to meet in order to qualify; they might have to do with purpose of your business, how it can stimulate the economy or serve the public, etc.
Grants will also differ depending on where you are based. Ultimately, just ensure the ones you look into are government schemes or offered by approved institutions. That way you know they’re legitimate, and if you qualify you could be in for a nice chunk of funding.
The cost of a startup is considerably less these days than it once was, especially if your business is based online with minimal overhead.
With this in mind, it may be possible to launch the venture with your own savings, should you have some on hand.
Forming an accurate and structured spending plan (and allowing for some unexpected costs) will enable you to determine if this is a viable option or not.
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If you have an attractive business proposal that forecasts real growth potential, crowdfunding is an excellent way to seek capital.
Pitching to peer-to-peer lenders and stakeholders and without any emotional involvement will also enable you to gauge enthusiasm towards your idea.
In a past article, Ask Money echoed this as a reason to consider crowdfunding: It helps you test out your idea based on impartial responses, and—should the idea be popular—brings in funding at the same time.
It’s prudent to consider that it may take time to hit your target through crowdfunding, though. As the name suggests, you are looking to create the capital via a number of investors, rather than one influx of capital.
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4. Family & Friends Investment
Possibly the most obvious go to place for financial support in the early stages of growing a business is to your own network—your family and friends. Looking to those you know and trust to find funding is a quicker option than most, and enables you to draw up more flexible terms as well.
It’s actually a more popular route than you might expect, and it’s how a lot of business leaders get started.
Nevertheless, it can also be somewhat awkward, and it’s important to consider your relationships when assessing the potential repercussions should the business struggle.
5. Bank Loans
One more traditional and still very popular option is to fund your startup through a bank loan.
This will require a detailed business plan to present to the bank, so it’s wise to invest your time creating a convincing proposal.
- description of your product or service;
- a layout of your management and organization;
- marketing strategies;
- and sale and expense projections.
Today, some lenders may also want detailed plans as to how you project to manage the pandemic and any potential setbacks.
Meanwhile, it’s also important on your end to make sure you’ve done all you can to find the best terms and interest rates available.
Provided all of the above though, you have a reasonable chance of obtaining startup funds from a bank or similar lender.
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We hope these suggestions were useful and help you to secure the funding you need!
Do you have more tips that can help funding a startup? Please share in the comments below!
For more advice on startups and small business leadership, click here.
Contributor: Amy Reed
A part-time writer and business school student. Prior to pursuing her MBA, she worked in multiple startups in tech and healthcare.