Top 10 Creative Startup Financing Methods
Building your own business is a challenge that can be very rewarding. The problem is that many banks won’t lend funds to new companies, and even when they do, interest rates may cut too deep into your young company’s profits. This article will discuss 10 creative startup financing ideas.
Oftentimes family and friends quickly get on board with a business idea and may offer to back it before you even need to ask for funds from them. They may work out an informal arrangement with you that helps you to seed a project without worrying about monthly payments, which would have been the case if you took out a bank loan. Once you’ve exhausted your inner circle, taking your concept to the masses is a great startup financing builder. With an online audience, you’ll reach people quickly and in large numbers. Crowdfunding may move a complete stranger to lend or even donate to your cause.
Getting a bit more creative, some startups have used the factoring of accounts receivables to raise capital. This is basically where the company sells their invoices to a third party in exchange for cash. It’s a way to put the revenue to use to continue operating and growing until the buyer actually pays. Purchase order financing is another type of factoring that helps businesses who are making a lot of sales to keep cash on hand.
Networking with other entrepreneurs may open up peer-to-peer lending opportunities. Not every startup is strapped for cash, and if your concept is good, other business owners may be willing to invest a little in your idea. If you have good relationships with your suppliers, vendor financing may be another option, where a supplier agrees to an arrangement that your company will pay after the purchased goods are sold. Organizations that exist for the greater good often offer microloans to help small businesses to grow. The amounts tend to be smaller than what banks offer, but that doesn’t mean they’re insignificant.
Sometimes the best startup financing options are the ones right in front of you. Personal credit lines are a quick and convenient way to get capital, and your own savings are another. Borrowing against a 401(k) or IRA is another option that many entrepreneurs use with success, and you don’t have to limit it to your retirement account; check with others to see if they’d also be willing to take a loan out against theirs to help seed your startup.
So, how creative will you be with your new venture? Startup financing comes in many forms, and only you know what source(s) are best tapped to get your idea off the ground.