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How to raise startup funding for small businesses

November 26, 2014

Starting your own small business can require a lot of time and money from a new business owner. Here are some tips on securing funding.

Securing startup business funding is a often necessary first step in order to buy equipment or hire for your small business. While it may seem daunting to raise startup capital, especially all at once, here are some ways you can get funding for your small business.

  • Take out a loan. The traditional way to get money for your small business is to take out a loan from a bank or a lender with a reasonable repayment plan. In order to make sure that banks will consider lending your business money, you should create a financial plan detailing what the money will be used for and in what timeframe. Then you should have a list of guarantors that can vouch for your financial responsibility and be ready to take on the burden of your debt if you are unable to pay back your loans.
  • Seek help from investors. Many of the successful, wealthy entrepreneurs you see on TV were originally where you’re at right now – just getting started. Utilize your connections to help get some funding from those who were in the same position you are in now. But what if you don’t know someone who may be willing to invest in your big idea? Seek out accredited investors. For instance, Angel investors are accredited investors who have a net worth of at least $1,000,000 and are willing to give investment money to help fund your business.
  • Money from the masses. Crowdfunding for small businesses is a new trend that makes it much easier for businesses to receive funding. Using sites like Indiegogo and Kickstarter to raise small sums of money from lots of investors using reward incentives is a great way to entice potential investors to send money your way. All you need is a compelling argument for why you need their money, and you can begin to crowdfund your small business idea. Other crowdfunding sites like Angel List are linked to a whole network of investors that can provide larger amounts of funding each, though you need to have at least $100,000 of startup capital already accrued before you can get started.

Remember, making sure you have the necessary documents proving your responsibility and dedication to your business is important in order to show lenders and investors that you deserve the money you’re asking for. The more prepared you are, the more likely they are to believe in making your dreams a reality.

Tell us! Are you a small business that has used crowdfunding or other means of startup business funding? Which has been most effective for you?