You wrote the business plan and you chose the business you truly want, but now you need a stream of cash to fund your dreams. There are several options to choose from when it comes to funding your business. When doing the research for my business, I went through this list to help me decide how to fund my business–the first two routes of bootstrapping and family loans.
The first three sources for funding your dreams are free money (even though technically they are free, they do require work).
Bootstrapping: An individual is “boot strapping” when he or she attempts to find and build a company from personal finances or from the operating revenues of the new company. You will use your own funds–be it savings or taking on a part time job– and use that money to support your dreams of starting your business. You can learn more about bootstrapping on Inc
Business Plan Competitions: These happen at local, state and nationwide levels. You submit your business plan to a panel of individuals. Some competitions you must be accepted into others you just register and attend. There, you will get 3-5 minutes to pitch a panel of judges your business. Prizes from the competitions can range from $500- $50,000. They also lead to incubator programs, but keep in mind that every competition is different. You can learn more about Business Plan Competition on Entrepreneur
Grants: These are non-repayable funds given by grant makers, to a recipient. In order to receive a grant from a particular agency, there is some form of “Grant Writing” required. This is normally considered a proposal for your company. In addition, a plethora of grants require some level of compliance and reporting. Just like any type of free money, grants are hard to come by but well worth it if you can obtain one. Great resource on grants: Here , Here , Here and Here
Crowd-sourcing: This method has become popular in the last 3-4 years across the nation and the world. Crowd-sourcing is the process of getting work or funding, usually online, from a crowd of people. Kickstarter is the main site millions of people use for this type of sourcing. On Kickstarter, your project should give rewards that are very creative (a great video does wonders too). Also, with this platform you must obtain the full funding of your project to receive the money. The government has to notice the influx of people using the crowd-sourcing tool. They also have implemented new rules and regulations. Please do your research. Resources: Wiki , Mashable, Entrepreneur
The last couple of sources in funding your dreams are all capital that you will have to pay back plus a percentage of interest depending how it was set up.
Family & Friends Loans: Some say, “don’t mix family/friends with business,” and others say, “why not included them.” In the last two years of reading Latina Magazine, I have noticed a plethora of articles about the Latin Hispanic culture in which they support each other’s businesses. They will start “saving clubs” to help family and friends start a business or send a child off to college. If your family is able to help you fiscally to start your, business tap into that. But, make sure there are legal agreements in place to protect your business and your family. I received a loan from my dad to start my business and he has since been paid back.
Small Business Loans: A small business loan is usually obtained from a bank or credit union. Each company has their own rules and regulations on how small business loans are guaranteed to the individual. You will be given the money plus a designated interest that you and the bank agree upon. The perk of a SBL verse an Investor is that you don’t have to sign over a percentage of your company to secure these funds. The SBA website has great information regarding small business loans. Also, there are varies entities in every state, such as your local Small Business Development Center, that can direct you in the right direction regarding loans. Banks and credit unions also set up meetings and seminars to help.
Investors (Angel or Venture Capitalist): Most Americans are now familiar of what an investor is because of ABC’s hit show Shark Tank. Some of your favorite companies and brands used investors, angel funds, or venture capitalist to get their start in business. Google is a prime example. Google was funded by some of the top people in Silicon Valley. Everyone would love to get an investor to fund their idea, it is possible, but very daunting. One of the things that most people know is that you have to give up a 45% stake in their company to receive these funds. Every relationship is different. There a plethora of sites that go in depth about investors. A great resource that connects investors and people like us is AngelList.
Ps. I am huge fan of how Mark Cuban got his start. You should read up on him. It’s a great story behind the man who owns the Mavericks.
All in all, when funding your business, you have to remember that you must be comfortable with the process. If you feel uneasy getting money from your family to start your business, then that route is not for you. If you’re not looking to give a percentage of your company up and pay interest, then VC or Angel investors are not for you. Research all these funding possibilities and find the one that works best for you and your company.