Starting a business without capital is impossible. But you don’t have to wait years to save before breathing life into your business idea. Sometimes, it’s just impractical to rely on your own income to fuel your startup. What if you’re fresh out of college and haven’t worked yet? With a student loan in your wake, your chances of earning capital without outside help are thin.
You can earn capital in several ways, the most common being: getting investors, crowdfunding, or getting a loan. All three can provide you resources fast, but not without a bit of effort from you, though.
That said, let’s walk through what you’ll likely experience with these three funding options.
Most successful companies in the world were once startups struggling to get support. They sought out that support from initial investors, the people who contribute money into a business idea and be stakeholders in turn.
Your probability of getting investors for your startup depends on your network. If you’re not connected to like-minded people or experienced entrepreneurs, you may find it harder to find investors. No one would want to entrust their money to someone they don’t know. Even if your business idea looks promising, investors should be certain and confident that you have what it takes to grow the business. Failing your business means losing your investors’ money.
But if you happen to be outside the circle of entrepreneurs and other business or industry experts, there are still ways for you to catch their attention. Find them on LinkedIn and make yourself visible on the site. Introduce your startup on your profile, but more importantly, introduce yourself. Talk about your experience, your brand’s story, and motivation, as well as its mission. Identify what makes you and your business unique. Show your passion and dedication. Those will make investors attracted to your business and consider giving you resources.
Take note that you’ll also be helping your investors grow their money. Don’t lose sight of that fact by focusing too much on your need for capital. Instead, present yourself with confidence, and investors will more likely put their money on you.
However, investors are smart, and they can see through someone who’s selling something too perfect. But don’t be discouraged. Honesty is the key to earning investors’ faith. Highlight your business’s selling point, but don’t hide its potential flaws.
Crowdfunding is becoming increasingly popular among starting entrepreneurs. This is also like getting investors, but in this case, you’ll use crowdfunding sites instead of LinkedIn. Kickstarter and Indiegogo are two examples of crowdfunding platforms.
In a way, crowdfunding is similar to using GoFundMe, but crowdfunding platforms are specifically designed for business ideas instead of donations. And because you’re technically seeking investors here as well, you have to make a solid marketing or fundraising campaign for your startup idea. Potential donors should be impressed with your business, and willing to bet their faith in it.
It may take hundreds to thousands of donors for you to earn your target capital. To encourage funding, devising a reward strategy is a common approach. This is favorable for you because you won’t be selling an equity stake in your business. Instead, you’d just offer rewards for smaller donations ($5 — $50) and larger donations ($51 and up). Just ensure that your rewards won’t break the bank.
Crowdfunding is a good funding solution because it can also give you a chance to connect with smart investors and like-minded people. But it’s not easy for some entrepreneurs because crowdfunding requires you to disclose financial and business plans out in the open. That can be risky if the platform you’re using isn’t secure.
Getting a Loan
The tried and true small business (SBA) loan should be your choice if you want to skip the marketing and time-consuming meetings with investors. SBA loans are government-backed but issued by private lenders. And since it’s a loan, it has requirements and qualifications you need to meet. You may also need to provide collateral, such as equipment, real estate, or any other asset that your lender can seize in case you failed to pay back.
But giving up collateral will be easier than letting investors or donors down. At least, lenders won’t try to influence you on how you’ll use the money, which investors and donors may do. It’s also easier to get in touch with lenders. They just need to see your business plan to determine if you’ll be a worthy borrower. And of course, you need to show them your ability to repay.
These funding strategies may be hassle-free, but they won’t give you capital overnight. You can speed up the process, however, by polishing your business plan and making sure that you’ve covered all the points your fundraisers may ask about. And most importantly, ensure that your business will be profitable and worth the risk.