One of the biggest challenges many aspiring entrepreneurs face is the dreaded F word. FUNDING.
This is often the major deciding factor to start their own business and sadly, often many will let their dreams wither away and their brilliant ideas remain fond memories.
When entrepreneurs think about obtaining funding to bring their ventures to life, they limit their thoughts to banks and credit unions. There are however other routes to tap into. This article will describe seven sources of funding.
- Team Members– Business is generally referred to as a team sport, and even though the media has glamorized the idea of the solopreneur or an entrepreneur who works alone, having a team to help when starting a business can have multiple advantages. One such benefit is funding because a team can help generate the funding required to make your business a success.
- Family and Friends– Most family and friends love each other and want to see each other succeed. Relatives and friends usually do not mind helping with start-up capital or whatever they can share to see a business idea become a reality. Don’t be afraid to tap into your friends and family as a source of capital if they are genuinely willing to help.
- Early Customers– One of the best ways to generate money to build a successful business is to bootstrap. After selling your products and services to the very first set of customers, invest your returns back into your business to help propel your venture. Guy Kawasaki speaks about this in the Art of the Start. He recommends that you start your business using a consulting/coaching model and use the money you accumulate during your company’s infancy to build your business. In the early stages, do not focus on making money or taking huge salaries; instead, concentrate on earning revenue to reinvest into the business for its growth.
- Crowdfunding– This may be one of the newest ways to raise money. It involves a number of individuals that support a venture by donating towards the cause. For instance, you can get on a platform like Kickstarter, create a campaign, and invite others to fund your idea. Bear in mind that various platforms have different requirements. For example, you can also use a platform like Teesprings for free and sell T-shirts to your online community then use that money to propel your business.
- Grants, Competitions, and Awards– Different competitions and a number of agencies offer grants and other forms of financial assistance for aspiring entrepreneurs. Be proactive and seek those opportunities. You can look at your local business bureau and government agencies to look for grants that you can apply for to take your business forward.
- Angel Investors– Angel investors are financiers who are willing to provide startups with the necessary financial backing. However, to attract willing investors, you need a well-prepared, convincing pitch and a properly written business plan. Remember: the average person does business with people they know, like, and trust, so be likable when pitching to an angel investor and focus on the solution you intend to provide with your product or service.
- Financial Institution and SBA– The most common funding source, especially for many small businesses and aspiring entrepreneurs, is financial institutions like your local bank, small business association, or credit union. Once the business idea will be profitable if it comes to fruition and other funding options are not available, consider applying for a loan from a financial institution. Currently, to make loans repayments more manageable, many organizations even offer micro finance programmes for micro entrepreneurs.
We would like to explore each source and discuss the situations in which you should either use or avoid them?
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