The traditional way to start a business is to fund it yourself. In the past, people would usually start a business if they had the funds available to sustain themselves and the business for at least 2 years. Today, the trend is changing. Those who have the drive to start a business do not have the time to wait for funds.
If you are such an individual, who wants to get going on their business idea today, then here are some alternatives to traditional funding you can explore.
6 Alternatives to Self-Funding Your Business
You have worked hard for what you have in your bank account. Putting it on the line to support a business is not always a good idea. Usually, a business can take up to two to three years to become self-sustainable. To dip into your savings for such an extended period can be risky. No matter the business, there is always a risk that it might not work in the real world. It is always better to keep yourself secured. Trying to find alternative funding is always preferable to self-funding.
Here are 6 ways you can fund your business:
- Crowd Funding
- Angel Investors
- Bartering Your Service
- Government Grants
- Friends and Family
1. Crowd Funding
If you have a business proposal, present it to the viewers on the website. Use video format, presentation format, whichever makes you comfortable. Visitors to the website go over your proposal and have the option of funding your idea if they see the potential for it. They can decide to fund the entire business themselves or they can partially fund it. These people are known as your backers. Once you have reached your funding goal, the website will release the amount to you.
Once your business is operational, you are legally obligated to give your backers a return on their investment. All you need to start then is your business idea in a presentable format and an internet connection. For my startup, Hughesnet Business Internet took care of that.
For a sizeable stake in the business, you can find angel investors willing to shell out up to a million dollars. If you are willing to share a part of your company, this is a viable option for you. You will have to work hard to find and convince these investors to finance your business. Local networking can go a long way in finding you the right people. Other resources, like the U.S. Small Business Administration, are also good ways to connect with angel investors.
3. Incubators and Accelerators
If you can manage it, starting up your business with incubators or accelerator programs is a good alternative. Most incubators provide free resources to help start-ups and many of them provide seed funding as well. Usually, accelerators provide funding as well, but most tend to be short-term, for a maximum of 90 days.
The benefit of joining these is that you get a professional environment where you can focus on starting your business. The other major advantage is that these places provide you with valuable resources and consultations that can help you get your business off the ground faster.
4. Bartering Your Service
While it is difficult to use bartering to start your business entirely, it is possible to use it to ease the burden. If you are good with technical services, or that is what your business does, try to barter your services for others’. You could speak with your office-building manager to see if they would allow you to offer technical support to all the other tenants, in exchange for office space.
5. Government Grants
There are many kinds of grants available. Government grants, private grants, and some specific grants. Try to find a grant you could qualify for. Some grants focus on investing in a certain ethnicity or gender; others focus on a specific trade segment. In order to qualify and successfully receive a grant is not easy. There are mountains of documents, planning and paperwork filling you need to do before your application goes forward for approvals. While it is a strenuous exercise, the fruits of your labor will be worth it, in the end.
6. Friends and Family
Going to your friends and family is always an option. There are two trains of thoughts associated with it. Some people believe going to friends or family is a terrible idea, as it can lead to strain on the relationship. Others say that this should be the first option to consider as it gives your closest relations the opportunity to grow with you.
If you have limited resources, like most of us, it can be risky to fund your business yourself. If you have decided to go the safer route and find funding elsewhere, there are things you need to do. You need to make your business plan as detailed as you can. Add a detailed market analysis and growth plan. Highlight investor returns. Most importantly, package your proposal and yourself well.
Remember, anyone who is investing in your business is essentially investing in you. If you can convince them of the fact that you know what you are getting yourself in to, you can successfully find funding for your business.