5 Ways You Can Raise Funds for a New Startup
Thousands of people in the United States dream of starting their small businesses. As a matter of fact, according to the most recent data, 4.4 million new companies were established in 2020 alone, a record for new companies.
There is one thing that all of these businesses had in common: they all needed money to get started. Raising sufficient funds is essential for getting a small business off the ground and laying the groundwork for its long-term viability and success.
How can you raise funds for your new venture quickly?
Raise Capital Yourself
If you want to avoid borrowing too much money, it might be worth your while seeing what you already own that you could sell. While this isn’t possible for everyone, it is most definitely an option if you have belongings you can sell at a pawn shop, to collectors, or family and friends. It can be an easy way to raise some or all of the investment you need to get up and to run. Look at jewelry, vintage items, collectors memorabilia, tech, and more to help you get the funds you need.
According to Forbes, most startup founders use their savings to fund their ventures in the beginning.
Refrain from depleting your savings account to raise funds for your company. Ideally, entrepreneurs should set aside enough money to cover their living expenses (rent and groceries) for a full year of operations. This is because many startups are not profitable for several months after they are established.
Unfortunately, a bank loan for a small business is not a guaranteed loan. Banks require business plans that are thorough and have excellent credit scores before considering approving a small business loan.
They may also require you to invest your own money in the company to demonstrate that you are genuinely committed to making it successful. You can use your bank because they will already be familiar with your banking history and be more accommodating. Alternatively, select a financial institution that has a history of lending to small businesses. Choose a lender backed by the Small Business Administration (SBA) to increase your chances of getting a loan.
Angel Investing and Venture Capital
Entrepreneurial venture capital and angel investing are best suited for high-growth companies or businesses already profitable and have strong cash flow. Nonetheless, each investor has a specific area of expertise in region, industry, and company history.
In any case, you’ll need to come up with a unique concept and a solid business plan to attract their attention. Through their SBIC program, the Small Business Administration can assist you in connecting with potential private investors. Typically, investments are made over three years.
To find the most appropriate government grants for your situation, you may need to do some research. Fortunately, the Small Business Administration (SBA) has offices all over the country that can advise you on available grants and provide business consulting and training. Grants.gov contains information on over 1,000 federal grant programs, which can be found on the website along with all the requirements and conditions you need to know.