Funding Options
Friends and Family
You’ll often hear this group referred to as the 3 F’s: friends, family, and fools. Generally, this group is not a good source of funding for your business. Keep your personal and professional lives separate to ensure that your business gets off on the right foot.
Banks
Many entrepreneurs get a small business loan from their bank. Often, the bank will require some sort of security in case you are unable to repay the loan. Be sure to review loan terms very carefully.
Government Programs
Most governments offer resources to help new businesses. This can come in the form of payroll rebates, low-interest loans, or grants. Check with all levels of government to see how they can help you.
Private Programs
Large businesses and non-profit organizations may also offer resources to help entrepreneurs. Check with industry organizations, your mentor, and the Internet to see what is available in your area.
Venture Capitalists
Venture capitalists provide funding to startup companies (usually high-tech) in exchange for shares or equity. This usually means that they will profit if the startup company goes public or gets sold. Keep this in mind if you are seeking money from venture capitalists.
Angel Investors
Angel investors are typically wealthy individuals with money to invest in companies that appeal to them. They often enjoy the challenge of starting up a new business and may look for opportunities where they can be hands-on.
Bootstrapping
Bootstrapping means building a company from your own money and assets. Profits are then reinvested in the business. Typically, bootstrapping works best for very small companies with low startup costs, short sales cycles, and simple products. This is the route that many part-time, home-based businesses use. Although it can decrease your debt and increase profits, if you don’t generate enough revenue to invest back in the business it can also stunt the business’ growth.
Crowdfunding, Sponsorship, and Co-Op Programs
Asking your customers to help you start your business is another way to generate revenue without going into debt. In exchange for their support, your business will provide them with a product, service, membership benefits, and/or co-op ownership rights.
Bartering
You can also consider bartering to help start your new business. For example, let’s say you sell single-serve coffee machines and you need design help for your website. Perhaps you could find a local web design firm and offer them a machine and a service contract in exchange for their help. This also helps you get your product out in the marketplace and establish friendly relations in your community. Just be sure that you’re getting back what you give.