Acquiring funds for your startup can be extremely challenging, especially if you want to work with a traditional borrower. Banks have very specific eligibility criteria for small business loans.
You need to have a high sales volume, a sizable amount of reserves, and strong credit to be eligible for a small business loan. However, if you cannot meet the lending requirements of banks, you should consider funding options outside of banks.
What type of funding will be suitable for you depends on your business goals and financial needs. For example, tech startups can easily capture the attention of angel investors and venture capitalists. Here are some realistic ways to secure startup funding outside of banks:
1. Friends & Family
Convincing investors and banks to lend you money can be extremely hard, especially when you are starting your first-ever business. Getting loans from friends and family is a classic way to fund your startup.
However, there are many dangers to using this type of funding, such as over-borrowing or damage to relationships if you lose the money. If you do decide to borrow money from family or friends, make sure you seek legal advice first. You should also be honest about when they can expect the repayment of the loan.
Bootstrapping is one of the most common ways to start a business. It describes a situation in which you use your own funds to start a business, without relying on outside investments. You can use your personal savings, mortgages, lines of credit on your house, or low- or zero-interest credit cards.
You can assess where you stand financially by getting a free credit report. This will help you work out the interest rate you will receive on loans. The downside of this type of funding is that you may end up with a considerable amount of debt if your business falls through.
3. Keep Your Day Job
Whether you work at an online casino or have an in-office job, giving up your employment may be a mistake if you are having a hard time acquiring funds from anywhere. It’s hardly judicious to be hasty about quitting your job when your business is not off the ground. If your job pays well, stay long enough to get by the early, difficult phases of building a business.
4. Accelerator or Incubator
Many business incubators and accelerators have emerged all over the country. You can use these funding options to get access to the best opportunities and connections in the business world.
Startup incubators help entrepreneurs hone their business ideas and build their businesses from the ground up by providing them with seed capital and office space. These organizations may also provide companies access to angel investors and venture capitalists.
Business accelerators, on the other hand, offer mentorship and educational resources to expedite the growth of early-stage companies. These programs may also provide seed funding in some cases.
Crowdfunding is a great funding option for people who are good at social media. You can raise money to finance your startup on platforms like Kickstarter and Indiegogo. Many startups use the massive reach of these platforms to collect money from a large number of people online. The downside is that businesses often overextend themselves which may discourage the backers.