19 Smart Ways to Secure Funds for Your Startup

Each startup company needs capital to finance the initial setup and ongoing operations. This includes funding for product development, purchasing new equipment, and the initial rollout of your employees to pay you or fund general operations. To run a successful business, entrepreneurs must be able to use and manage their finances.
A good plan is essential to ensure the success of a startup. Many startups fail because they lack funding.
You need to find smart, proven ways to fund your startup to ensure it doesn’t fall under this category.

Smart Ways to Secure Funds for Your Startup

19 smart ways to secure funds for your startup

These are smart tips to secure money for your startup.

1. Bootstrapping

Bootstrapping means that you can build a business from scratch, without needing to attract investment or have minimal capital. It helps to reduce the amount of money needed and lowers interest rates or requires minimal capital.
It allows beginning entrepreneurs to start a business without any experience and attract investors.
Bootstrapping doesn’t mean you have to give up any equity or ownership in your company like you would with venture capital or angel investment.
Bootstrapping means you need to generate revenue as soon as possible to continue funding the business.
Bootstrapping allows you to retain full control over your business and be fully responsible for it. This can often look like working part-time on your business idea while also maintaining a regular job.

2. Family and Friends

Borrowing money from family and friends to start your business is a terrific method to get started. Family members often believe in you, even if it is more difficult to persuade banks or investors of the quality and merit of your concept than it is to persuade friends.
Friends and family may be more willing to invest in your business. If you need loans, it’s a good idea to get legal counsel from family and friends.
What are the drawbacks? What’s the drawback? If you take this path, you should proceed with caution.

3. Apply for a Personal Loan

Business loans can be difficult to get by when you’re starting a business, owing to your lack of existing revenue. It’s a typical case of “chicken and egg.” In situations like these, personal loans may be a viable option.
While obtaining a corporate loan is frequently contingent on factors such as your company’s health and creditworthiness, obtaining a personal loan is contingent on your traits. Lenders will examine your credit score, source of income, debt-to-income ratio, and intended usage of the loan carefully.

4. Loans from a Bank

A bank loan for a small firm is not guaranteed. Banks want to see a sound business plan and a high credit score before issuing small business loans.
They may want you to invest in your company to show that you are sincerely committed to its development.
Your bank may be a good partner because they are familiar with your banking history. You might also go for a bank that specializes in lending to small businesses.

5. Submit a Grant Application

What better method to fund your startup than with free money? It’s not easy to get a grant to help you start a new firm. As a result, you don’t hear about it very often. Grant programs, on the other hand, do exist. A grant may be available from a variety of sources, including:

  • Grants from the federal government
  • Grants from state and local governments
  • Private grant foundations

Grant programs are available for specific sorts of enterprises as well as specific demographic groups. Veterans, women, single moms, and other groups can apply for small business grants.

6. Use a Crowdfunding Platform

Crowdfunding flips the traditional method of raising startup capital. Crowdfunding gives you a platform to share your plans and requirements for your budding company, instead of pitching investors or institutions.
The internet allows investors to reach you, which is a better way to pitch your ideas to potential funders.
There are three main categories of crowdfunding: equity, donation, and debt.
Remember that each crowdfunding site has its requirements and funding requirements. Before you commit to a platform, make sure you carefully review the details and thoroughly research your options.

7. GoFundMe allows you to raise funds for a cause

GoFundMe, a crowdsourcing website for personal causes or unforeseen life events, is very popular. You could also use the site to raise capital for startup ventures.
This platform does not have any connection to existing investment communities. Donations are more likely from your immediate network as well as other people you can spread the word to. GoFundMe was created with social sharing in view.

8. Business incubator and accelerator program

Organizations that provide programs to companies to speed up their growth and success are called business incubators. They are often there until the company achieves its goals. While their role overlaps with those of business accelerators in that they typically have a 3 to 4-month timeframe, the latter focuses on companies at an early stage and not on those that are already launched.
Programs such as the business incubator or accelerator offer startups viable options to connect with potential investors. These programs are usually for a few months and require commitment and time.

9. Raise Funds On Kickstarter

Kickstarter is the most well-known crowdfunding platform. Kickstarter boasts that more than 19 million people have pledged their support for a project and that over 190,000. projects have been funded successfully.
Kickstarter is a reward-based fundraising platform. Investors are not required to invest to achieve financial or equity returns. Instead, they get a “reward for their generosity.” Most often, backers can use the final product or service before everyone else.
If you have a compelling pitch and a great idea, Kickstarter can be a good option. However, the platform will not release funds until your campaign has reached its funding goal.

10. Small Business Loans

This stream of startup capital is often the first choice for small business owners. However, it should not be. The process of getting a business loan approved is not an easy one. Additionally, you must report to your bank the amount that will be spent. A bank might view your business as a risk factor if you are a new business owner. If this happens, the loan application won’t be approved or at high interest rates. This option can also launch your business in credit.

11. Credit Cards

Either you can use your credit card, or you can open a business card.
This option may be available to you. But don’t take it lightly. High interest rates on credit cards can cause your monthly balance to increase. Your debt balance could be much higher than you anticipated, which could lead to financial difficulties for your business.
Are you still confident that credit cards are the best option for you? You should make sure that you have a card with the best interest rate and repayment terms.

12. Product pre-sales

Product pre-sales, while not the most popular method of raising funding for your startup but it is still an effective way to do so. This means you will allow pre-order arrangements for your products before the official launch date. This is a great way of creating product hype, and it can also be used to test the market for product demand.
There is an inherent risk in the fact that you may need to pay upfront money for product development and completion before your product launches.

13. Get a PayPal Working Capital loan

PayPal does offer loans. PayPal Working Capital is a short-term funding option that relies on an existing business’s PayPal earnings. PayPal loans may not be the best option for a brand-new startup without any earnings. But, it can be an attractive option for small businesses with income.
Fill out the application via your PayPal account to apply. PayPal will process your credit cards, so you don’t have to give any extra information. They know your financial situation!

14. Get into your savings

Another option is to fund the startup yourself. You could save money for a downpayment on a house or other major purchase to help you launch your own business. This is risky as you don’t have any savings in case your business fails. There are many positive aspects to this route if you are willing to place your bets. First, you don’t have any obligation to sell your equity. Instead of sharing profits with investors, you get to keep the entire profit. A line of credit or bank loan will not require you to pay interest. You won’t have to pay anyone else for anything, so you don’t have to disappoint family or friends who might have borrowed your money. This is not an option for everyone.

15. Search for a strategic partner

You’ve probably heard the expression, “Two heads are better than one.” A strategic partner can accelerate your startup’s development. You and your partner have a bank account. You might be able to save enough money between you two to start your startup.
If it isn’t, another person can help you get funding using the other methods I have described in this post.
Your liability is reduced if you have partners. If things go south, you won’t be responsible as much. You’ll only make half of the profits on the flip side. Giving equity to other investors could result in even lower returns. You need to find someone you trust. Your strategic partner might be able to bring new ideas and solutions, but there may also be disagreements.

16. Use Peer-to-Peer Lending

Peer-2-Peer (P2P), also known as social lending or crowdlending, combines the crowdfunding model from Kickstarter with more traditional lending techniques. P2P is essentially a matchmaking service that helps people connect with businesses that need money.
P2P loans offer two main advantages over traditional loans. First, you can apply online. It doesn’t take long to get your business ready for inspection. This entire process can be completed at home in your bedclothes.
A second benefit is that getting approved and receiving funds are often much quicker than traditional loans.
However, the downside to this is that P2P lenders can be very risk-averse when it involves lending to individuals with iffy credit.

17. Venture capital

It is often misunderstood what the venture capital business is. Venture capital companies are often criticized by startups for failing to invest in risky or new ventures.
Venture capitalists are often referred to as sharks because of their predatory business practices. Or they can be called sheep because they think like a flock and want the same deals.
However, this is incorrect. Venture capitalists are business people who invest other people’s funds. They are responsible for minimizing risk. They shouldn’t take on more risk than they are required to meet the return/risk ratios requested by their capital sources.

18. Strategic Customer Partnership

Strategic customer partnership refers to when a customer, or business, funds your startup to begin production and start operations. They are prepaying for future services and products that they will receive. These partners will not have any other control or equity over your business.
There are some compromises involved in turning your startup into an investment. These compromises are not always a deal-breaker and can lead to more benefits than you might think. A partnership is a way to at least split the costs. This can be very beneficial if you are just starting.
A partner can also provide many other benefits. You may have complementary skills or experience. Potential investors will be more likely to invest in your startup if you have a good partner. You will also be more visible to potential investors.

Making your startup a partner can require some compromises. These aren’t necessarily disadvantages and you may reap more benefits. Partnerships are a good way to split costs. This is a great way to start a business.
Partners can offer many other valuable services. Partners may have skills and experience that complement yours, or they might know to help you. Good partners will increase the appeal of your startup to potential investors. 

Final Thoughts

These funding options listed above will depend on the type of business that you are planning to start and how much capital it requires. Sometimes it is smart to seek financial support from multiple sources. Other times, it may be a wise decision to stick to a conservative approach. It is important to plan your finances and business strategically.

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