Getting Funding isn’t easy in any economic climate, especially right now when businesses are more competitive than ever. Unfortunately, no matter how brilliant your ideas are, they need money to come to fruition. Remember, a Business is still a business, no matter how small or passion-driven. You need capital to pay your staff, buy equipment, promote your brand, and survive day to day. While there’s no single best way to get funded, you’ll find that some methods might suit your business model or goals more, so it’s important to study all your options carefully. 

Whether you’re a tech start-up, artisanal café, or a boutique agency, here are a few ways to get started with funding.

From Your Own Pockets

You might have heard of the term “bootstrapping” when it comes to the world of development, but it applies to businesses, too. Chron defines a bootstrap company as one that operates on minimal investment or financial dependency, and is typically started with minimal upfront investment from the founder’s own money. The biggest advantage of this method is that it avoids making Loan repayments that end up eating up cash. 

Of course, there’s also the risk of having limited resources. So, consider having multiple streams of income that you can use to fund your business, like taking on freelance gigs or keeping your day job. If your schedule doesn’t permit either of those, then this method is best combined with some of the other types of funding below. 

Friends and Family

One effective way to gain capital is to get your friends and family in on your business. After all, who better to support your vision than your loved ones? However, be aware that things can get messy when you mix work with personal relationships. Should the business fail, you risk damaging your connections and losing their trust.

Therefore, make sure that there is a clear structure that dictates the guidelines of the funding, especially with regard to interest and borrowing rates. Have a third party outside of your relationship to oversee the process, and seek legal advice before inking any deals.

Get Crowdfunding

For start-ups, crowdfunding has become the go-to way to pay. This method drives power back to consumers by allowing absolutely anyone to pitch in for ideas they believe in. On the business owners’ side, it lets them to avoid having to deal with venture capitalists or drowning in a sea of debt.

Though it’s similar to peer-to-peer lending, it does not require repayment. Sometimes, a company would instead pledge free products, discounts, or other benefits in return to make sure that the supportive public doesn’t go unrewarded. Tech writers on Digital Trends list some of the most popular crowdfunding platforms, such as Kickstarter, Indiegogo, and Gofundme.

Apply for a Small Business Grant or Loan

For those who’d rather not give away a piece of their business, applying for a grant or a loan is a viable choice. The main difference between the two is that a loan requires you to pay for the money you borrow, while a grant does not. 

There are various institutions from whom you can apply for grants, such as state governments and private groups. However, the application process can be a job in itself. From looking for opportunities to solidifying your business model, there are many steps you need to take to make sure you’re qualified. Of course, the effort is more than worth it if you happen to succeed. 

Similarly, a loan comes with strict lending standards and qualifications you need to meet. Businesses that are just starting out might have difficulty applying for a loan, since most banks would require some form of cash flow for at least a year to prove that you can repay the money borrowed. But for businesses that have had at least a year of revenue and transaction history, then SBA loans, term loans, and business lines of credit are all possible options — provided that you read and understand the terms of the loan well. There are various factors to keep in mind, such as banks’ interest rates. FXCM’s article ‘How Central Banks Control Interest Rates’ details how exactly they work, and it is important to understand so you don’t come out with a bad deal. Fortunately, with today’s improved economic conditions and increase in competition, more lenders are willing to slash interest rates for small business loans. This doesn’t mean it’s easy, but if a bank approves you, then you’re more likely to get a lower interest rate in favor of scaling up your business. 

Angel Investors

Business writer Katharine Paljug states that angel investors are also called informal or seed investors, usually backing promising business in their early stages. Along with funding, they are also likely to provide mentorship and advice.

But although they may sound like a gift straight from heaven, they have their fair share of barriers. Like we previously discussed here on Strategics 360, it’s imperative that your product or service is unique and offers something that customers can’t get anywhere else. This is especially true for these investors who tend to be extremely selective about where they put their money. However, if you can hammer down your business plan and are transparent with your projections, it’s possible to grow your relationship with an angel investor from there.