Funding is a subject often talked about with lots of debate. Many entrepreneurs are not comfortable giving up a large chunk of equity to get that starting cash. If things go well, it certainly can seem like too much was given up. While sometimes it’s necessary to raise significant funding, for small projects you can carve out a very lucrative niche with minimal startup funds if executed well. Some of the mechanisms out there to raise those small amounts are:
Crowdfunding Sites
These days, crowdfunding sites are a legitimate way to get funding for almost any idea you can come up with. If you can demonstrate why your project is exciting and valuable, then you can get regular members of the public to chip in with their support and this will often be enough to get you off the ground, while also giving you a lot of free exposure. Check out our many other blogs on the subject under the category of “crowdfunding”.
Credit Cards
While the interest rates on credit cards are daunting, when the funds are only needed for a short period of time, they can provide a very liquid form of cash in a crunch. This is not a mechanism that should be relied upon too often. It is one of the most expensive forms of credit, but it is also one of the easier lines to get. If you need the cash for longer periods of time, a bank loan or line of credit should be looked into.
Bank Loans and Lines of Credit
If you have good credit, a bank loan or line of credit through your bank can be a good option. A line of credit is basically just a bank loan that only accrues interest on the money that is being used. I’m a big fan of lines of credit as you get competitive rates similar to a bank loan, but with the flexibility of only having to pay the interest on the money used, like a credit card. With any bank loan or line of credit, make sure you read the fine print, particularly know if/how the rates can change, if there are any annual fees, or other associated fees like for appraisal.
Friends and Family
If it’s only a little bit of funding you need, then you could always consider turning to your friends and family for help. In most cases, they will be eager to help you make your dream a reality – but just make sure you draw up clear terms to avoid falling out. Mixing friends and business can be tricky, so make sure you know what you’re doing. Make sure you write a contract that clearly explains what you are giving in return for the loan, including the timelines of when the money will be paid back and what happens if it isn’t paid back in the allotted time. This will make your friends/family more comfortable and will help easily resolve any questions of fairness that might come up in more tenuous situations.
Grants
If your idea is artistic, or in some way philanthropic, or if you are someone who can demonstrate they are worth investing in for the government, then you may be able to get a grant to start your business. It means getting the money instantly without having to pay it back. A shame all funding can’t be like that! Others that can look into grants are if your product will provide a positive impact in some way or if you are a woman or minority owned business.
