By Luke Fitzpatrick. Originally published at ValueWalk.
Launching your startup can be both exciting and frightening. On the one hand, you imagine all the fantastic and life-changing possibilities your ideas can bring to you, your team, the industry, and the rest of the world. On the other hand, you have to build a business entity from the ground up–and securing funding has to be one of its most challenging parts.
If you think you have a great idea but are worried about whether you can raise the required capital to turn your vision into reality, check out these five methods of getting funds for your startup business.
1. Online lending platforms
Traditional banks are notoriously known for high rejection rates and long processing times, not to mention the near-absolute decision based on credit scores. If you don’t have a good credit rating or the entrepreneurial assets to back it up, it’s hard to take out a personal loan from them.
Online lending platforms are a leading alternative for many loans. They can be applied for and approved within a day without you having to leave your home–from application to requirement submission, all from your device. Furthermore, most of these platforms are more lenient when reviewing.
One such platform is 1West, a leading small business financing solution provider. Kunal Bhasin, 1West founder, and CEO, explains their platform as a “premier SMB financing marketplace that combines technology, sales, and operations on a single platform for small businesses.” He adds that the platform has already provided over $1 billion in financing for small businesses in different industries across the country. It also uses the latest technology to streamline and speed up the application process.
“Through our new technology platform ABLE (Automated Business Lending Engine), small businesses have the opportunity to apply for capital, upload necessary documents, and get real-time updates in one easy-to-use portal,” Bhasin adds.
Crowdfunding is an increasingly popular method of raising funds. As the name suggests, you let the crowd “fund” your business. Of course, you can rely on the goodwill of the public or strike a deal with them, such as a discount voucher or a sample of your product in exchange for your support.
For a more formal and structured approach, you can even raise funds by offering shares on your company for a set price. What makes crowdfunding different from traditional fundraising methods is that it is primarily online, and businesses can raise funds with many people online.
Depending on the nature of your startup, you can check out any of the popular crowdfunding sites starting with the largest of them: Kickstarter and Indiegogo.
If your focus is on content creation, such as artists, writers, and graphic designers, Patreon is a good choice. If you’re looking for equity crowdfunding or offering up your company shares, check CircleUp.
3. Peer-to-peer (P2P) lending platforms
Whereas online lending platforms are financial institutions and private companies capable of lending the capital your startup business needs, peer-to-peer or P2P lending platforms connect you primarily to groups or individuals that provide the funds you need. The best platforms include Upstart, LendingClub, Zopa, and Prosper.
Suppose you’re looking for a relatively small capital, plus a platform that offers fair opportunities even to those without good credit history or bad credit scores.
In that case, P2P platforms can help you out. Additionally, you can generally expect lower rates because of the high competition among lenders and the low overhead–lenders don’t have operating costs aside from the small transaction fee required by the platforms.
Create a good proposal, and you can expect a lot of offers to come your way. Make sure to choose the best one in terms of interest rates and payment terms.
4. Government startup funds
Startups are a great way for bringing whole ideas and technology to the public, and the government recognizes this. That is why there are a lot of government grants for startup businesses. The most popular of them are:
- America’s Seed Funds.
- The Small Business Innovation Research (SBIR).
- The Small Business Technology Transfer (STTR) programs, powered by the Small Business Administration (SBA), accelerate the commercialization of potentially groundbreaking ideas and technologies.
Although there are significant differences in requirements and coverages, both can provide significant research and development funding, especially for technology-centered startup business ideas. These funding programs consist of two phases: concept development and commercialization.
5. Angel investors
Also known as seed investors, serial inventors, and private investors, these groups and people are those who offer funding and support to startup businesses that meet their standards.
Whether it’s from an industry of their preference, startups led by people from the same hometown, or a compelling business plan, they are looking for the next promising idea to help take off.
The typical arrangement with angel investors is that they will provide the funds you need in exchange for a share of the equity. However, make sure that your potential angel is a duly registered entity. You can also find them on certain websites, such as Angel List and Tech Coast Angels.
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