It’s always been a difficult hurdle to raise money for a new business, even when the economy is healthy. Banks want collateral and years of positive cash flow or adequate financial reserves before feeling comfortable lending capital to a business, which rules out many new businesses that are just starting out. Since it will most likely be harder to obtain funding from traditional sources, you will need to consider some creative ways to finance or bootstrap your business. Here are some options for your new business to gather enough cash to start and become profitable.
Network with angel investors. If you have a sound business plan and prior industry experience or other qualifications, you may attract the attention of angel investors. Angel investors are wealthy individuals that usually have business experience that will invest money in start-ups. They are a great asset, not only for their financial resources but they may also provide mentoring and advice due to their past business experience.
Borrow money online. Online social lending has become very popular recently and provides a quicker way to receive funding. Sites like Prosper and Lending Club allow normal people to borrow money at a lower interest rate that is basedon their personal credit score. As soon as your loan gets fulfilled it’s immediately deposited in your bank account. The payments for the loan are immediately taken out of your checking account each month.
Borrow money from your loved ones. In times like these if strangers don’t believe in you and your business enough to lend, hopefully your friends and family will. Many of the most successful entrepreneurs have relied on their close relationships for startup funding. Make sure to include a written and signed agreement to protect every party involved.
Get a grant. You may also be able to obtain federal grants if you are a minority or a woman. Check with your local government to see what programs they have available. Some of the grants may be industry specific, but if you talk with the right authorities they will be able to point you in the right direction.
Your credit cards. Although some experts may not recommend it, if you ask your creditors to raise your credit card limit and can afford at least the minimum payment, at the very least you will have enough to get your business off the ground.
During our current economic situation, starting a business now may just be the financial boost you were looking for. Keep in mind that starting a business takes hard work, but with the right planning you can be a success.