By Kelly Bagla, Esq.
Contrary to popular belief, money does not grow on trees. If you want to start your own business but do not have the funding, you can still get it off the ground in a number of ways. As a business attorney and an entrepreneur, I admire anyone who wants to create a company. It’s not easy, in fact, only half of small businesses in the United States will survive through their third year of operations. Furthermore, just 22% of those businesses make it through ten years. I’m hitting my tenth year in October 2019.
Based on this information, it’s clear that failure is more frequent than success when it comes to starting a business. While running a startup may be difficult, it is also extremely rewarding, but getting your startup off the ground is the first step and in order to do this you will need money. Below, I have outlined some ways for you to get your startup funding.
CREATE A DETAILED BUSINESS PLAN
Before you do anything, you will need to have a clear understanding of how you plan to operate your business. A business plan will increase your chances of securing funding. Companies that have a business plan also have higher growth rates because investors want to see financial projections and that your business has a clear path of where it is going, before they consider giving you any money.
CREATE RELATIONSHIPS WITH YOUR LOCAL BANK
Create relationships with the banks you use for your personal banking by setting up appointments with the local loan officers. Explain to the loan officer how much money you need and what it will be used for. Depending on your situation, you may qualify for loans for certain aspect of your business, such as equipment. You could also try a personal line of credit.
You could consider funding your startup with your own funds. If you have some money saved up, you could use it to launch your business. It could be risky but if you are willing to bet on yourself, there are some positive factors to this route: you keep all the equity, you keep all the profits, and now you have just become an attractive prospect for others to give you funding.
SEEK HELP FROM FRIENDS AND FAMILY
Usually, friends and family are second on the list for top startup funding sources. These are the people who trust you and believe in you and are more willing to loan you money. This funding can be secured by stock in your company or repayment with some sort of interest. This way you are not taking advantage of your friends or family but are willing to work hard to repay the loan with some gains.
Venture capitalists, also known as VC firms, in vest in the early stages of startups in exchange for equity or stock. If you decide to take this route, be prepared to give away a portion of your business. That’s not always a bad thing. A VC firm can provide you with other resources that can contribute to the success of the company.
Although these terms are often used interchangeably, angel investors differ from VC firms. While angel investors can take an equity share of your startup in exchange for their investment, their funding can also be exchanged for convertible debt. Usually, angel investors are entrepreneurs themselves and if you find the right one, you may benefit from their expert advice and management skills. It is more common for angel investors to supply funding to your business when you are still in the early states, whereas, VC firms typically look to get involved a little bit later.
Take advantage of the resources available to you online. You can use crowdfunding websites to raise capital. If your project is promoted properly, you can raise a lot of money. While most people think of Kickstarter when it comes to crowdfunding platforms, there are some alternative websites you can consider, such as, AngelList, CircleUp, CrowdFunder or Fundable.
Getting a strategic partner for your startup can help accelerate the development of your business. Between the two of you, you might have enough money saved to get your startup off the ground. While strategic partners may be able to bring new ideas and solutions to your startup, they can also help you succeed faster in attracting bigger funding sources.
Starting a business is exciting but it’s not cheap
For more information on how to legally protect your business please pick up a copy of my bestselling book: ‘Go Legal Yourself’ on Amazon or visit my website at www.golegalyourself.com
Disclaimer: This information is made available by Bagla Law Firm, APC for educational purposes only as well as to give you general information and a general understanding of the law, and not to provide specific legal advice. This information should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.