It has become easier than ever to launch a startup; however, finding money to fund the endeavor among greater competition is not an easy task. There’s no need to view finding seed money as an insurmountable obstacle, though, and there are a number of ways to attract capital. Michael del Vecchio, a financial advisor and accountant who has helped a number of businesses in countries such as Panama, the US, Malta and more keep their papers in order, shares some of the more common avenues available.
The first, and most obvious choice where possible, is to use your own savings. Having “skin in the game” will make you more attractive in the event you have to find outside help. This doesn’t mean selling your home or car, but you should look for ways to invest your own money first.
Many entrepreneurs turn to incubators or business mentoring programs in order to find capital. Explains del Vecchio,
“Accelerators can be found in almost every state, and a developing number of urban areas are likewise home to startup incubators. There are even online accelerators.”
Crowdfunding is another possibility. This allows an entrepreneur more flexibility and financial freedom, especially compared to venture capital or investors funds, and can immediately validate the business. Crowdfunding has an added benefit of being able to provide an additional marketing channel.
A small business loan can also help a business get off the ground. Asserts del Vecchio, “The vast majority accept that they can receive venture or angel capital investments when getting started, but, in actuality, it’s more difficult than many realize. Unsecured loans are typically processed quickly and small business loans from the government can also be a great source of working capital.”
Believe it or not, turning to friends and family can be a great way to secure capital. Don’t take their money – borrow it and treat the transaction the same way you would treat a bank loan. Have a formal agreement drafted that states all the terms and conditions and then sign it with the lender.
If you have retirement savings, perhaps you can take some out to fund the startup. This may not be the most ideal solution, as most retirement plans have tax implications for early withdrawals, but this would have to be explored in each case. “Check to see if the retirement fund offers a ‘rollover as business startup,’ which would allow money to be withdrawn for business purposes without any penalties,” explains del Vecchio.
If possible for the particular endeavor, consider taking pre-orders. This will allow the business to start receiving revenue before having the products ready to ship. Keep in mind, though, that the orders will have to be fulfilled as quickly as possible or the business will come to a grinding halt before it actually gets off the ground.
Don’t let the lack of funds in a bank account stop you from following your dreams as an entrepreneur. There are a number of ways to receive investments to get things going and, although the money may not come easily, it will still come, allowing you to grow your business as expected.