A few decades ago, the American Dream was all about landing a solid job, working there for 40 years or longer, and retiring with a sizeable pension or 401K. However, new generations of entrepreneurs are bringing about a change in the way we view success.
For some of us, the idea of owning our own business, whether a small, humble establishment or a thriving corporation, is much more desirable. The new American Dream means working for ourselves and building our empire.
However, everyone must start at the same place – entrepreneurship funding. The phrase “you’ve got to spend money to make money” is just as true today as it was 10, 20, and 30 years ago.
But where do you start? Follow along for a list of your most common and obtainable options.
1. Apply for a Business Loan
Most people start their search for entrepreneurship funding at the banks. Applying for a business loan is one of the most traditional ways to get startup money.
However, there are a few drawbacks to this method.
First, your credit score may hold you back from getting the funds you need. Additionally, there is a ridiculous amount of paperwork and an equally annoying processing time. Finally, these loans often require collateral, such as placing a lien on your home.
However, business loans from banks come with predictable payments, low-interest rates, and the building of credit, as well as relationships with professional bankers.
2. Look for Investors
Private investors may be one of your best choices for entrepreneurship funding, especially if you can’t get financed through the bank. Private investors can be anyone from friends, families, previous bosses, etc. They can be paid back based on a percentage of your business’s earning, installments toward the initial debt, etc.
Angel investors are affluent business people (typically in similar industries) willing to invest in a start-up business in the first stages of development. They are also known to invest when others are unwilling, assuming they believe in the project and the start-up owner. Angel investors are often rewarded with equity in the business or another form of debt.
Venture capitalists provide funding for start-up businesses that are already showing high growth patterns. They contribute large sums of money to put toward the advancement and expansion of the start-up in exchange for stock in the company.
3. Apply for a Line of Credit
Another option that requires a decent credit score for entrepreneurs looking for start-up financing is applying for an open line of credit. An open line of credit allows the borrower to request an open-ended loan. They get approved for a maximum amount from which they can borrow, payback, take out and otherwise revolve funds.
4. Consider Taking on a Business Partner/s
If you’re having trouble coming up with funds by yourself, it may be time to consider bringing more people on. While your dream may have been to own a business on your own with no partners, your financial situation may dictate a different reality.
Bringing on one or two more partners will increase your funding, but decrease your control. However, having the extra brainpower may very well be what helps your start-up propel upward.
5. Start a Crowdfunding Campaign
If you’ve been on social media for very long, you’ve likely witnesses crowdfunding at work. Often, people will bring awareness to their cause, such as a sick child or a tragic loss. They reach out to their followers and friends on social media to raise money for the desired cause.
This is also a viable option for entrepreneurship funding. However, you must understand how crowdfunding works and why people would be willing to contribute to your startup.
6. Try Your FundingTree
Your FundingTree is an exciting funding opportunity where banks and other investors compete to earn your business. This often leads to lower rates and better customer service.
All you have to do is submit a questionnaire/application. From there, a financial advisor will review your application and work to pair you up with the most appropriate potential investors. If you think Your FundingTree may be a good fit for your business, find out more about the process.
7. Trade Equity or Services
Sometimes, the skills and services we can trade are just as valuable as money. While these skills and services won’t get you money from the bank, it may be a useful bartering tool with potential private investors.
For example, you could trade business space for free services (either related to your business or not). You could also trade equity in your business to affiliates, investors, or other sources who can help with your entrepreneurship funding.
8. Seek Help From Friends and Family
For some, seeking financial support from friends and family would be there first move. For others, it would be their last. Regardless of where you fall on the spectrum, it remains a viable option.
However, be warned that mixing money with family or friends can often lead to awkward and/or disrupted relationships. Make sure you draw up contracts stating the terms and conditions of your loan, regardless of how generous or nonchalant they seem about helping fund your startup.
9. Apply for a Government Grant
In some cases, entrepreneurship funding can be obtained through government grants. However, this highly depends on your business, your products and services, and how they can benefit society.
A small business targeting social, educational, or healthcare needs have a good chance of obtaining government grants. It can be a long and arduous process, but this funding method won’t create any debt.
10. Use Your Own Money
Finally, you can choose to use your own money. This tactic often called bootstrapping, requires pulling all of your funds together and scraping the bottom of every barrel to finance your start-up without the aid of others.
However, with nearly 80 percent of Americans live paycheck to paycheck, this option may be a bit of a reach. However, if you find yourself with the ability to be your own investor, it may be the most cost-effective choice. It comes with no debt, no obligation to others, and no interest.
Want More Advice on Getting Entrepreneurship Funding?
There are a lot of options for entrepreneurship funding. You can use one, some, or none of these options. Ultimately, you have to do what’s best for your business.
However, if you’re looking for more business-related advice, be sure to check out the rest of our articles before you go!