How to get money to start a business? That is one of the most common questions among early-stage entrepreneurs who need capital to land their first customers or establish the competency of their business.
Thanks to the rise of low-cost business services like PayPal, Shopify, Woo-commerce, Squarespace, Slack, Amazon, etc. the money you need to start a business has drastically reduced, over the past ten years. According to the 2018 INC’s 5000, 42% of America’s best 5000 businesses have started under $5000. So, in this blog post, we’ll try to find a way to raise $5000 to start a business quickly.
How to get money to start a business – Top picks
- Starting a new business can be an overwhelming process. However, it won’t be that hard if you know to the right way to start a business.
- How much money do you need to start a business? The good news is, it is not as much as you think; all thanks to the amazingly affordable business services like PayPal, Shopify, Woo-commerce, Squarespace, Slack, Amazon, etc.
- If you are an early-stage entrepreneur, trying private equity, banks loans, and venture capitalists to get money to start a business might NOT work.
- The best (and the quickest) ways to get money to start a business is by self-financing, asking money from friends and family, angel investors, Incubator programs, and crowdfunding.
Where you shouldn’t go to get money to start a business
Looking to get money from private equity groups
Private equity (PE) groups are not usually interested in early-stage businesses. Their focus is more on later-stage businesses with strong management teams and higher turn-around opportunities.
Getting money from bank loans to start a business
Getting a bank loan to start a business may seem like the best option to move forward. However, banks require hard assents and guarantees to secure their loans. Of course, the Small Business Administration (SBA) offers a variety of guarantee programs for startups. However, getting qualified for SBA is a daunting process for some businesses.
Banks also offer microloans for early-stage startups. To get qualified for a microloan, you will need to include personal guarantees and some form of collateral. Sometimes, you will have to take business-training courses to qualify for the microloan.
Working with venture capitalists to get money to start a business
Venture capitalists usually work with entrepreneurs with a solid and proven track record. According to the USA TODAY business columnist D.Strauss, venture capitalists are interested in businesses that require an investment of over $250,000 and the startups that show a potential for explosive growth.
The best ways to get money to start a business
Self-financing to start a business
Self-financing is the easiest and quickest way to get money to start a business. However, there is a downside of using your personal assets to start a business. If anything goes wrong, you are entirely on the hook!
If you are thinking of using your personal assets to get money to start a business, make sure you evaluate your business plan over and over again. Don’t hesitate to ask for other’s opinions about your business plan. Once you feel confident about your startup idea, you can get money by cashing out your personal savings, selling personal assets, getting a personal loan from a bank, cashing in your retirement accounts, etc.
Additional reading: How to make money online
Asking from friends and family get money
If you have some wealthy friends and family, sometimes they might be looking for a good investment opportunity. Most of the time, you will have to give up some equity to get the money from friends and family. However, working with them is much easier and flexible than working with outsiders.
Working with angel investors to get money to start a business
Angel investors are usually the high net-worth individuals, who would like to invest in startups – often in exchange for equity. It is like asking money from a rich non-relative.
Apart from getting money to start the business, the best thing about working with angel investors is that they usually offer guidance and networking opportunities based on their experience in the industry. You can find angel investors through your personal contacts, from startup incubator programs, and from the platforms like Microventures, TechCoastAngels, etc.
However, getting the yes from an investor is not an easy process. So, make sure that practice your elevator pitch to grab their interest within a minute or two.
Crowdfunding to get money
Crowdfunding platforms like Kickstarter and Indiegogo let you have crowdfunding campaigns to get money for your startup idea. However, most of the crowdfunding platforms work in all-or-nothing basis. For example, if you ask for $5000, and if you couldn’t raise $5000 within the campaign period, you will not be partially funded.
Before you go crowdfunding to get money to start your business, make sure to practice you in business storytelling to attract the attention – and cash – of individual donors. Also, when crowdfunding, you will have to offer something to the donors in exchange for their money. For example, some giveaways or one of your products can help you to gain attention to your campaign.
How to get money to start a business – Now you know!
In this post, we have discussed four methods to get money to start a business. Raising the capital to start a business can daunting process for many early-stage entrepreneurs. However, if you have an excellent business idea and a plan to achieve your goals, it won’t be hard to convince your investors to believe in you and your business.