Best Ways to Fund a Startup Business

If you asked a dozen people the best way to fund a startup, it’s likely you’d get a dozen different answers. Perhaps there isn’t one absolute best way to fund, but this guide should help you narrow it down, or at least help you rule a couple of methods in or out.

The Personal Loan

There may not be a better place to head first than the bank, especially for those with good credit history. The bank is America’s oldest, most reliable financial institution, and repaying a bank loan in a timely manner builds credit substantially. Research and find out which bank works best for your business. This is an excellent tool for bank shopping. Be prepared to explain to the bank where every bit of the loan will be going. If you’re starting a smaller startup business, consider a microloan or an alternative business loan.

Credit Cards

If you have a very good or excellent credit score, you may want to consider a line of credit fund. While risky due to the potential of numerous fees and penalties, a line of credit loan is perhaps also the most rewarding, as it affords you full control over the financial aspect of your company. Also, depending on the credit institution, several spending/payback rewards can be accumulated using credit cards.

Sometimes a credit card is the only place to turn for an entrepreneur, especially if the startup business is extremely small, (five or less employees). Just remember to read all of the terms and conditions, and to not let yourself fall behind on repayment.

Crowdfunding

Crowdfunding is sort of the rookie on the team of possible ways to fund your startup. Basically, the business plan is proposed online and anyone can donate to the fund of starting the business. More often than not, some type of return on the investment of donors is offered. While this may almost seem like free money, it’s important to remember how competitive this method is. There are businesses that receive nothing after years of attempted crowdfunding. While crowdfunding is not a bad potential backup plan, relying on crowdfunding is moot unless your business is so rock-solid everyone wants in.

Venture Capitalists & Angel Investors

A venture capitalist is an investor or team of investors who fund startup businesses wishing to expand but unable to access the stock market. Venture capitalists invest in the business itself and its projected profit. If you feel confident enough in the success of your startup to pitch it to a venture capitalist, start here, at the National Venture Capital Association. For more in depth information regarding venture capitalism, click here.

Bear in mind that venture capital is not easy to come across and is extremely competitive. Read this article by Forbes explaining the woes of venture capital before pitching.

Angel investors are the polar opposites of venture capitalists. Angel investors are usually either local to the startup business or familiar already with the entrepreneur him or herself. Also, angel investors are investing in the entrepreneur, not necessarily the profit of the startup. Also known as private investors, an angel investor can be a friend, a family member, a former partner, etc. To search for an angel investor not already familiar to you, check out Gust.

Overall

There are countless other ways to fund a startup. We wanted to show you a combination of the most commonly practiced and the most reliable methods. Some other ways to fund a startup worth mentioning are by selling assets, product presales, a home equity loan, a grant, or self-funding if you happen to have the capital.

A personal loan is by far the most reliable and least risky option. Credit cards give you the most control, but pose a high risk. Crowdfunding can be miraculous, but is by no means a guarantee. Venture capitalists and angel investors may be hard to come by and even harder to convince, but a good business plan and a good pitch can land you some funding. As a matter of fact, a solid business plan, combined with confidence and a good pitch, is crucial to any method of funding. Do your research and further your startup today!

When You Are Ready, We Are Here!

When you apply with us, you’re applying with a trusted company that cares about your financing needs. We’ll take care of you through the whole process.

Still not convinced? Learn more
APPLY NOW
  • Unsecured Loans up to $150,000
  • Save Money - The Lowest Rates in the industry
  • Funding is Fast - Less than Seven Days Turnaround
  • Versatile - Multiple Industries Funded