So, you have that grand idea paying out in your head… But how do you bring it to real life? You need money to make money, but getting that first influx of cash for your startup can seem impossible.
Ahead, we’ll take a look at ten ways to fund your first startup. Most of these don’t require any money upfront, which is ideal for a lot of start-up owners.
#1 Seed Funding
Obtaining seed funding is an excellent strategy for those with a groundbreaking startup idea. The FOMO (fear of missing out) is real in the investment circles, which motivates investors who are looking to find the next big thing.
Of course, entering an already crowded market probably won’t generate much interest from investors looking to give you seed money. If your idea is innovative enough, though, you will likely be able to find some interested parties for seed funding.
#2 Crowdfunding
Crowdfunding is becoming more and more popular in the start-up space as technology advances. Several companies and brands used this platform to get their ideas off the ground.
One of the biggest benefits crowdfunding has is that you can receive funding without giving up power over the company. It’s also good to get the word-of-mouth flowing, and possibly attract some venture capitalists in the process.
Since the format of crowdfunding promotes sharing, you’ll also get some free marketing out of a crowdfunding campaign.
Of course, you also have to compete with a lot of other entrepreneurs when you use a crowdfunding site. Some companies can’t stand out from the pack enough to make a splash on such platforms.
#3 Angel Investors
Angel investors are rich and powerful business owners who are looking for the next big idea. They may offer you seed funding, but can also come with a lot more to offer than just money.
Angel investors traditionally have a hand in the business as well. They offer you advice and open the door to new funding opportunities.
While angel investors are some of the best sources of funding for startups, they don’t always offer the funds you need up front. The value is often in their expertise, which will serve you well.
#4 Take Out a Loan
Borrowing from a bank is how a lot of small companies get off the ground. A lot of banks have strict lending criteria when it comes to individual borrowers, but a solid business plan should generate some interest.
You will have to have a good credit score, low debt, and a strong business plan to get a loan from a bank. You will also have to put up some of your sizeable assets as collateral for the loan, which makes it a bit riskier.
Still, borrowing from a bank is a feasible option for those who aren’t able to generate funding through traditional sources. You will be able to find a modest interest rate from most lenders and get started growing your business.
#5 Microloans
Small business loans can be difficult to secure if you’re running a start-up. You might not have the credit history or collateral to secure a small business loan from a bank, but that doesn’t mean you have to walk away with nothing.
Visit a smaller lender like a credit union or building society. They’ll often be more open to lending you a few thousand dollars to get started with your business.
You won’t be able to borrow the same amount of money, but you can get a foot in the door without collateral or a copious amount of supporting documentation.
#6 Government Grants
The Australian government will also help you secure funding if you meet certain criteria. There are quite a few government grants that apply to those looking to create businesses in the country.
You’ll have to go through a lot of paperwork and waiting periods to receive a government grant, but you won’t have to pay anything back. For some small business owners, applying for a government grant is one of their best options.
#7 Apply For a Contest
Investors often run competitions to find a new startup idea. You’ll need to have a strong business plan and an interesting idea, but it’s possible to enter and win one of these contests to secure funding.
A lot of start-ups have a hard time getting in front of investors. Competitions will allow you to showcase your business to those who might be interested.
#8 Sell Your Assets
Some people who go all-in on a start-up company will sell all of the high-priced items they own. Things like cars, TVs, and other items you can live without will provide an immediate source of cash.
The downside to this strategy is obvious. You won’t have a car anymore, and might not be able to make the funds you receive last long enough. Still, it’s a decent option for those who are unable to secure funding elsewhere.
#9 Use a Credit Card
Funding a business through credit card payments is extremely risky but can pay off. You can start spending before you secure funding, but also need to make sure to keep up with the payments.
Falling behind on credit card payments can dig you a hole that will extend past the possible failure of your start-up. Your credit score will plummet, which will make borrowing from banks nearly impossible.
Using a credit card as funding is an option, but it shouldn’t be your first.
#10 Ask Family and Friends
You might not be too keen to ask your friends and family for startup money, but a lot of companies get their start this way.
There are, of course, better ways than others to approach your friends and family for funding. You shouldn’t simply ask them for money without any projections or formal business plans.
Treat your family the way you’d treat a traditional investor. Pitch the business strategy to them and how you plan to make the startup successful. Offer them a stake in the company or interest on your repayment.
Don’t just ask your family for money; make them excited about your ideas. No matter how confident you might be right now, there’s always a chance you’ll lose some of the money you borrow.
While this potentially puts your personal relationships at risk, the pill will be a lot easier to swallow if you’ve shown your friends and family concrete business plans and growth projections.
For more tips on making and saving money, visit Rate Comparison’s blog at ratecomparison.com.au.
About the Author
Jimmy Russo is a freelance writer, passionate about helping Aussies save money and make better financial decisions. He reports on all things money, home loans, investment and more.
