5 Ways To Get Startup Capital
After coming up with a brilliant idea for your new business and developing a rock-solid business plan, you’re ready to get started. The only thing lacking is the capital you need to get the company off the ground. Here are five possible ways to raise the cash you need to fund your new enterprise.
1. Personal Resources
Do you have personal resources such as savings or investments you can convert into working capital? Many people have taken this approach to funding their startup companies, even dipping into retirement funds or taking out a second mortgage on their houses. This is the easiest way to access cash. However, it’s also one of the riskiest.
2. Personal Loans
Another way to quickly acquire capital is to borrow money from friends and family. If this is an option available to you, be sure to document the terms of the agreement, including the interest rate and repayment schedule.
3. Small Business (SBA) Loan
Since SBA loans are government-backed, they are less risky for banks and private lenders than traditional loans are. There are a variety of SBA programs to choose from. If you have a solid credit score, this could be a great way to raise capital.
4. Venture Capital Investors
Venture capitalists will invest money into a startup they believe has a very high probability of success. In exchange for the funding, they take an equity position in the company, hoping to make a healthy profit when the company is either sold or becomes public.
5. Angel Investors
Getting capital from angel investors is similar to borrowing from friends and family, except they are people you don’t know. These individuals have excess funds they want to invest in startup companies. Like venture capitalists, they will take an equity position in the company. Unlike a venture capitalist who uses their venture capital firm’s money, angel investors use private funds.
There are many ways to raise capital for your new business, including using your own resources or borrowing from friends and family. If that kind of funding is not an option, you might consider an SBA loan. These loans are less risky for lenders because they are government-backed, making them more accessible to new companies than traditional bank loans. You may also consider finding investors, such as venture capitalists or angel investors. Each of these types of funding has its pros and cons. You’ll just have to determine which one is right for you.