FRANCHISE HERALD
Tuesday November 30, 2021

updated - November 30, 2021 Tuesday EST

Best Ways to Obtain Startup Capital

Oct 27, 2021 05:06 PM EDT | By David Thompson
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Best Ways to Obtain Startup Capital
(Photo : Image by StartupStockPhotos from Pixabay )

Investing in a startup business is an excellent way to earn money. A successful company can provide you with a high return on your investment, and the risk of failure is relatively low. There are many different ways for entrepreneurs to obtain funding for their startups. In this blog post, we'll discuss some of the best strategies proven to work time and time again.

Crowdfunding

Another way to finance your startup is to consider equity crowdfunding options. Also known as "crowdsourcing," the main idea behind crowdfunding is to raise money from people you don't know. Crowdfunding has been gaining a lot of momentum in recent years, and many startups have successfully raised millions by doing so. Of course, if you want your campaign to be successful, you need to make sure that it stands out from the crowd. Other than that, there is no limit on how much capital one can raise through crowdfunding.

SBA Loans

The Small Business Administration (SBA) provides financing for small businesses either directly or through an approved SBA lender that is more than happy to help out their clients. The loan you might qualify for will vary depending on your needs, but know that the sooner you apply, the better the chances are of getting funded - especially if others have already received what you were aiming for the same.

Self-funding

As the name suggests, self-funding refers to raising capital from yourself rather than going through big-name banks or corporations that charge higher interest rates and fees just because they can. At times bootstrapping might not provide enough money for your company's needs. If you are prepared to accept this risk, then there are very few downsides.

Grants

These are cash or in-kind contributions that you don't need to pay back, and usually, the only requirement is that you're a startup business with a mission statement aligned with what they're looking for in their applicants. This makes it a great option if your company fits into one of their categories, but be sure to apply directly through their website rather than using a third party. Grants are also available from various foundations, depending on where you live. These can be an excellent way to get started without having to give away any equity rights in your company, which is always preferable when there isn't enough money involved to make it worth worrying about.

Angel Investors and VCs

These resemble traditional bank loans in many ways. Still, instead of being funded by a small group or even an individual investor, this is usually done by a larger group of individuals who have more money to invest. Angel investors are typically wealthy business people and philanthropists who enjoy making significant investments in return for future benefits from the company. On the other hand, VCs are different because they also seek to take equity stakes and receive dividends from that stock after given time to grow. These types of financing options should only be considered once your business is already showing success and you're looking to expand further - you're way better off getting investment capital early on if you can manage without it.

Personal Loans

If you don't have the funds to get your business off the ground, this option may require an extra bit of creative energy. Personal loans are typically given for things like home improvement projects but can also be used by borrowers who need money to start up their businesses. These loans usually carry higher interest rates than other types of financing, so they should only be considered if you think it's necessary. If you decide to take up this type of loan, it would probably be best not to wait too long before taking action.

Business Credit Cards

This is another option that ties into personal credit rather than business credit (you'll likely only qualify for cards that are intended for entrepreneurs) and should be considered carefully. You can use these cards to finance future capital projects if you don't have the money to fund with cash on hand, but it's best not to spend more than what you can afford for your monthly payment. If you find that you've spent more than expected, look into transferring some of your debt or closing out your card, so you aren't paying unnecessary interest fees.

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