Advertising
Advertising

Top 10 Ways To Fund Your Start-up Business

Top 10 Ways To Fund Your Start-up Business

It’s been said that it takes money to make money. The aspiring entrepreneur is often pressed to find more funds. Where can you find them? Here are some creative ways to finance start-up businesses.

1. Founder’s capital

Prepare for your start-up business by saving. It will take much more money than you planned. Consider inviting a wealthy and trustworthy friend or relative to be a co-founder and perhaps silent partner. Other people and firms who might consider investing want to see that the founders are truly committed to the venture with their own funds.

2. Friends and family

These people believe in you and your ideas. They want you to succeed. They are mostly interested in the founders and if the concept sounds interesting. Many of them say, “If you, the founders, are committed to this, I know it will go far. Count me in.” Usually, they do not conduct complete evaluations of things such as reputation, revenue, or accident insurance coverage for employees, but rather invest based on faith. Their knowledge of the founders is the key factor that helps them get the risk to a manageable level.

Advertising

Most of these supporters come in prepared to lose their investments in order to support the founders in fulfilling their dreams. Consider selling unregistered securities through a private placement offering (PPO) to friends and family who qualify as accredited and sophisticated investors. Engage security attorneys to ensure compliance with the Security and Exchange Commission (SEC) and state “Blue Sky” requirements.

3. Barter

What services or products do you have or will you have that one of your service providers wants? Rather than pay cash, barter. Explore how you can exchange products or services instead.

4. Stock options

Talented people can often be enticed to work for equity as a form of compensation. Rather than fork out the firm’s limited cash, explore setting up a stock option for employees as well as consultants and service providers.

Advertising

5. Government grants

Government funding — at the national, state, and local levels — can support development of new technology at research institutions and support entrepreneurial activity. The technology from research organizations can ultimately be transferred to start-up businesses.

Explore what government sources are available for your venture. For example, apply for SBIR (Small Business Innovation Research) grants administered through the various US government agencies. If you are a foreigner to the country, make sure you know the additional requirements. The Citizenship Bureau gives you a better idea about the importance of Country of Tax Residence and Residential Status, should you start a business outside your country of origin.

6. Corporate fees and grants

Engineering charges for consulting and customized development may be available from commercial accounts interested in applying your technology to their pressing concerns. These corporations get an early look at the product offering and have the ability to greatly influence its direction. Additionally, these firms may evolve into long-term strategic partners.

Advertising

7. Revenue from product licensing and sales

Once you have a product available, revenue from its licensing and sales activity can help bootstrap the firm. Choose projects that will generate cash to fund your ongoing operations.

8. Debt financing

Some firms find debt financing through banks and other financial institutions and investors. The funds must be repaid plus interest. For example, the Small Business Administration has a business loan program that works in conjunction with banks. However, the majority of these lenders consider your credit score status as an important factor to determining your trustworthiness.

9. Angel investors

Angel investor networks have formed throughout the country. These high-net-worth individuals are sophisticated investors interested in early-stage private equity investment in emerging firms with great potential. They may also want a management or board position in your firm as part of the deal.

Advertising

10. Venture capitalists

After considerable due diligence, these firms make private equity investments in promising early-stage companies. A venture capitalist’s primary goal is to maximize financial return while getting the risk to a manageable level. In exchanging their money for an ownership stake in the company, venture capitalists also bring business acumen, contacts, and seasoned board experience to the firms in which they invest.

Featured photo credit: Ideator Team via ideator.com

More by this author

Junie Rutkevich

Game Developer of iXL Digital

8 Things You Should Consider Looking At When Buying A Home, Part 2 Zinc: The Usually Forgotten Micronutrient We Need Daily and Its Food Source How to Make Sure What You Sell Is What the Market Needs 7 Things To Consider Before Hiring An Advertising Agency Is It Necessary To Follow Traffic Rules?

Trending in Money

1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

Read Next

Advertising
Advertising
Advertising

Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

Advertising

Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

Advertising

I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

Advertising

Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

Advertising

So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

Read Next