One of the most pressing things about starting a business is funding. Having the necessary financial means to get your business up and running until you’re able to turn a profit can often be challenging. If you don’t already have some large nest egg lying around, funding your startup from your own pockets is probably not likely. The good news is that there are ways in which you can get the funding you need to get your business off the ground.
Before You Start Searching for Funding
Most of the methods for funding your startup will require you to have some form of credit. Since your company is new, you won’t likely be able to get much funding by using your company’s creditworthiness. As such, you will need to use your own credit history and score to apply for funding. If you haven’t done so already, you will need to evaluate your credit and make improvements where necessary. Some suggestions for doing this would include:
- Paying down debts – come up with a game plan to begin paying down any high or old debts on your credit report. The smaller your debt to income ratio is, the better chance you have at obtaining funding through various sources.
- Disputing inaccuracies – if there are inaccuracies on your credit report, you will want to make sure that you properly dispute them to have it removed. While this can typically be done with a simple letter to the credit bureau or a call to the creditor, there are instances in which removing it on your own can be a hassle. In such instances, working with a credit repair agency is advised. When looking for a company to work with, be sure that you do your due diligence to ensure they’re legitimacy. Evaluate their company website, check for consumer complaints, and even view some online testimonials to see the credit story of a customer that has used the services.
- Adapt Better habits – once you’ve gotten your debt taken care of and removed any inaccuracies, you’re going to want to adapt better personal finance habits so that this does not happen again. Adapting better habits is also great practice for when you start managing your own company finances.
Ways to Fund Your Startup
Now that you’ve made sure your own personal finances were in order, you’re ready to begin shopping around for opportunities to fund your startup. Below are four choices you might consider looking into:
- Apply for Grants
Many people are unaware of the millions of dollars the government sets aside to fund businesses. This money is yours to keep and does not have to be repaid, making it one of the best options for funding your startup. You’ll need to first search for the grant opportunities available to you. Review the eligibility requirements and deadlines. Supply all necessary information, and wait to see if you’re approved.
- Donation Based Crowd-funding
Another option you have for funding your business without having to repay the funds obtained is through donation-based crowd-funding. Crowd-funding is essentially the act of raising funds for your business from a collective group of individuals. In the case of donation based crowd-funding (which is becoming increasingly popular), you can ask for funds from interested parties without any need to pay them back. You would essentially set up campaign displaying what your business was about and why you believe it is needed (i.e. business plan) and ask for donations to get started.
- Credit Cards
This is where having good credit history is going to come in handy. If you need more funds and could not obtain them through grants or donation crowd-funding opportunities, you may need to apply for a business line of credit. However, since your company does not have any credit, your credit history will be taken into account. There are plenty of credit card options you could consider when trying to fund your business and each of them has their own pros and cons. Be sure not to spend more than you can afford to pay back so that your business credit stays in good standing.
- Small Business Loans
Last but certainly not least is the option to borrow funds with a small business loan. If you have a great relationship with a banking institution, you may be able to secure funds to get your company up and running. Again, your credit will play a critical role here since your business credit is not yet established.
Funding your business doesn’t have to break your personal bank. There are plenty of ways to raise funds for your startup that require little to no investment whatsoever. No matter which funding option you decide to take, having a decent credit history and a plan for repayment are essentially imperative to ensuring that you maintain a positive reputation. These four options are among the most popular options and should be enough money for you to at least get the ball rolling. Once you start earning the mega bucks, setting aside money to afford expenses on your own is ideal to prevent falling into debt.