Getting funding for a startup can be difficult, especially if you’re planning on working with a traditional lender. They typically look for high sales volume, strong credit history, and cash reserves. New businesses can tend to struggle when it comes to meeting these requirements. Before you start working with a traditional lender, it’s important that you understand your goals and the financing needs of your company so you can properly evaluate your funding options. Here are a few different ways you can acquire funding for your startup.
SBA Microloan
The Small Business Administration has a variety of loan programs that cater to startups. One of these is the microloan, which can provide a small amount of money to help fund working capital and equipment. Unlike other loans, the requirements for this program are less stringent. It’s even possible to qualify if you have poor credit, such as 629 or lower.
Venture Capital
Since venture capital is typically focused on high-growth companies, it usually only invests in those that are expected to succeed. If the startup doesn’t perform well, the investor’s return on their investment will be lost. Most venture capitalists also want to be on the board of directors of the company they’re financing, while some may even want a larger amount of ownership over the business. If you can get funding via venture capital, make sure you’re aware of the strings attached to it.
Crowdfunding
Crowdfunding campaigns have become extremely popular in the past ten years. Through a crowdfunding campaign, an entrepreneur can raise money for their business through an online fundraising campaign. In addition to giving away products or services, you can also encourage donations by offering gifts from hitting certain fundraising milestones. There are many great crowdfunding campaigns available on the internet, such as Indiegogo and Kickstarter.
Small-Business Grant
Grants can be hard to come by as competition for them tends to be high, but if you can acquire one you’ll essentially be getting free money for your startup. Unlike loans, grants don’t have to be paid back, and they can be used for anything your startup needs. If you’re in a niche market, such as minority or female business owners, you may have a better chance of securing a grant.