Gaining access to the capital you need to fund your business may seem like an overwhelming task. While you might have a business plan that outlines how you intend to make a profit, figuring out where to get the money to get started is more complicated.
A vast majority of startup capital comes from credit cards, bank loans and lines of credit. For those wondering what other resources are available, here are five places you may not have looked for money to cover your initial costs:
1. Grants
Unlike loans, this source of funding does not have to be repaid. You receive the money without years of loan payments or added interest to worry about.
Since other small businesses will be competing for this money, it will take more effort to get approval for a grant than other types of funding. Check into state and local agencies, government funding and local business competitions to find a grant that relates to the products or services that your business offers.
2. Friends and Family
Involving friends and family in financial matters can be a tricky business, but it has the potential for all parties to profit. The imposition that accompanies asking to borrow money from people you know can be balanced by an informed business plan. Putting in the time to study trends and forecast the success of your venture can help to earn the respect of people you know who can act as investors.
Aside from presenting a developed business plan, the other crucial part of seeking to borrow from friends is learning to accept “no” respectfully and maintain friendships that may feel uncomfortable for a time.
3. Retirement Funds
Borrowing from your future -- via an IRA, 401(k) or annuity -- is another method for affording your startup costs. Although it's risky to take from the money you would be using for living expenses during retirement, taking only a portion of the money can help minimize any losses you may experience.
Unlike using loans and credit cards, taking from your retirement plan often means using money you've already earned. Also, depending on what type of account you are taking money from, you may not have to pay it back. Be sure to check into the fees and penalties for pulling money early from these accounts.
4. Crowdfunding
Having a group of people gather together and provide financial support for your venture through crowdfunding has been made simpler by online sites. For example, Kickstarter, one website that encourages crowdfunding for creative projects, has made it possible for major entrepreneurial endeavors to succeed. Kickstarter funded a movie that was nominated for an Oscar and funded the popular game Cards Against Humanity.
Knowing the type of product and service you want to develop, as well as the clients you will market to, can help you to find a website that will assist you in the crowdfunding process.
5. Part-Time Work
While many people are not able to juggle working full time and starting a business at the same time, working part time or freelancing can provide some of the cash needed to buy equipment or begin paying the phone bills for a startup. Deposit this income into a business account, and start building your business credit rating -- which will give you leverage for more capital in the future.
Alanna Ritchie is a writer for Debt.org, where she writes about personal finance. Alanna has an English degree from Rollins College in Orlando.
