Start Up Business Funding Tips

Opening a start-up requires a great idea, an inordinate amount of work, and usually some funding to get off the ground.  Obtaining funding, however, can be difficult without a history of credit or revenue.  Even though traditional loans are off the table, it doesn't mean there isn't a way to obtain start-up capital.  Here's where start-ups can secure funding.

 

 

Friends and Family Loans

While may be uncomfortable going to family or friends for start-up funding, this is one of the most successful routes for entrepreneurs to secure capital.  It's a low- or no- interest loan that's far easier to obtain than a bank loan, though it is advisable to draw up a contract so that all parties are in agreement.  Especially for those with influential contacts or family/friends with money ready for investing, this can be a good option.

 

Crowdfunding

Internet has made crowdfunding accessible to almost anyone, anywhere. The startup creates a thorough business plan prototype of the idea or service and presents it to the public, asking for crowds of people to invest in exchange for either gifts, pre-orders, or even donations.  Check the legal details of whatever crowdfunding platform you choose as regulation varies.

 

Angel Investors

Technology startups, in particular, can benefit from angel investors.  These individuals are willing to put up startup capital in hope for an exit/equity event in the future.  If the company finds one, they will usually sell equity to angel investors at a rate of 10-50% of the business.

 

SBA Loans

The Small Business Administration grants loans in two forms: 7(a) small business loan program and microloans.  They work best for startups that already have a few years under their belt.  SBS loan approval takes approximately 60-90 days and garners $150,00 or more.

 

Home Equity Loans

Many entrepreneurs use the option of home equity loans to fund startups.  The amount varies, depending on house value and mortgage state, but this is a way to receive all the funding at once.  Payments are based on a 15-year term most often.

 

Retirement Loans from a 401k

This third party loan borrows money from the applicant's personal retirement funds, coming either from an IRA or investment account.  It's a newer type of financing and isn't recommended as a first option as it risks the applicant's personal finances.  However, those who do decide to pursue this option should work with an attorney.

 

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