You might have a good business idea but do not have enough money to start it. Finding startup capital is not easy for most people. Here are some tips that will come in handy when you are looking for money to start your business:
Start Slow
You might not need a lot of money in the beginning. If this is the case, you should start with your own savings. You could also hold down another job and use it as a source of money. If you plan to use lean capital, you should only spend cash on the necessary things. Once your small business takes off, you will have enough traction to borrow money through traditional means.
Borrow Money
You can use your individual retirement account of 401(k) as a source of capital. Because startups are tricky and you have no idea whether yours will succeed, you should consider using your own money. However, if you choose to borrow from establishments such as simplepersonalloans, you should write down the terms of your agreement.
Read over the loan terms carefully to avoid being caught up in a cycle of debt. A community bank might be more willing to lend to startups, which makes it a good starting point.
Ask Friends and Family
If you have nowhere else to turn, you should consider asking your family and friends for help in finding capital. This is an easier way to find money without jumping through contractual hoops. However, there are problems with this capital source.
Even when borrowing from friends and family, you should write down a solid business plan. You should also make sure that your startup is at the business stage and not the idea stage. Ensure that all involved parties sign a promissory note to make the deal formal.
Find Investors
As soon as you have a solid business plan and something to show potential investors, you can start approaching them. To find an investor, you should be willing to:
– Consult with local companies and organizations that have resources like startup cash
– Attend professional events for networking
– Connect with fellow entrepreneurs.
Does your city have angel investors? Such people are often willing to invest in startup companies. With an angel investor, you will not only get a source of capital but also some guidance. Although an angel investor does not offer as much as a venture capitalist, you should look for one.
As with the other forms of capital, you should also write a promissory note that outlines the obligations, terms, and rights of the loan. This includes the terms of repayment, interest rate, and loan amount.
Use Credit Cards
Most startups use credit cards for capital. If you choose a credit card as your source of capital, you should be comfortable with the credit requirements and interest payments. Credit cards are a great source of capital because they are fast, you can pay the money back when you want, and you can use them as needed.
In most cases, the rates of interest that credit card companies offer are steeper than for other loans. When choosing credit cards, you should look for the cheapest rates.
Government Sources
You should make use of the search tool by SBA Loans and Grants to find the best funding programs for your needs. These sources include venture capital and state economic development grants.
Conclusion
When looking for startup capital, you should remember to put everything in writing. The above sources of capital may or may not work for you. You have to try most of them to see whether you qualify for one.
