Building a business takes money. Even when you’re determined to bootstrap your development, you’re going to need funds to cover your basic supplies and overhead (rent, utilities, etc.). Finding the funding you need can be a challenge, especially if you’ve never run your own business before or if your personal credit is less than stellar. Here are some tips that you can use to make the process easier:
Work With a Professional
If you’ve never had to do any fundraising before, do not try to go it alone. As the experts at Dealstruck point out, successfully funding a company often means bringing in money from a variety of sources: loans, lines of credit, working capital funding, invoices, etc. Trying to cobble all of that together on your own can be overwhelming and confusing. You might be tempted to try to simplify it and, in that attempt, actually bury your business in more debt than you can handle. Work with an advisor to help you figure out how much funding you need and the different sources from which you should get it.
The best reason to work with a professional is that he or she can help keep you from making rookie mistakes like borrowing way more than you need to borrow, or borrowing from the wrong sources. They will help you figure out exactly how much you need before you start the application process.
This is an incredibly important step in the process of finding funding. It is better to know exactly how much you need and where that funding will go. In fact, many lenders will require this information before deciding whether or not to approve your application. Sure you can factor in some “wiggle room” for price fluctuations, but give as close to the real number as possible.
This means that you and your advisor will have to spend some time running the numbers and doing research. You need to know how much supplies will cost, the going rate for leasing a workspace, the going rate for employees in your field, how much it will cost you to provide benefits for those employees, etc. There are ways to reduce these costs, sure, but when you’re applying for loans, you should not cut corners with these numbers.
Tread Carefully With Debt
There is no doubt that you will have to take on some debt to fully fund your operation. That’s part of the spending money to make money thing. Still, don’t assume that huge loans are your only option. As a startup small business, there are *many* grants available to help you fund your company’s expenses. In addition to grants for your business, there are also grants for entrepreneurs that you can use to help get up and running.
Crowdfunding
Crowdfunding is now one of the most common methods that entrepreneurs and startups use to at least partially fund their startup costs. There are a few benefits to running your own crowdfunding campaign. The largest is, of course, that you do not have to pay that money back. Another major benefit that is often overlooked is that a successful crowdfunding campaign proves that there is already major support for your project or company. You can use that data to prove to a reluctant lender that you will be able to pay back your startup loans on time. Even if you have no business credit or have bad personal credit, this is data that can smooth the way for you.
If you do decide to go the crowdfunding route it is important that you pick the right platform. If you are absolutely brand new, you should choose a platform like GoFundMe or IndieGoGo. These platforms are good because they allow you to keep the money people pledge whether or not you reach your goal. If you’ve been around a while, though, and have managed to build some hype, you will definitely want to use Kickstarter. Kickstarter is the most widely understood and respected crowdfunding platform out there. Running a successful campaign there carries a lot of weight.
Investors
You might be tempted to leap right into the pool of venture capitalists and other types of investors. Slow down. For one thing, most investors want to see real data from a company that is already doing business–even if it is operating on a shoestring budget. You’ll want to be working on your project for at least a year before going after investment capital.
As you can see there are almost as many ways to fund a business as there are ways to build a business. Take your time here and go slowly. It is better to get this exactly right than it is to rush through and maybe make mistakes.