Having a great business idea is just the beginning. You need to turn an idea into a business plan and then you need to execute the plan in order to make it all come to life. Naturally, this execution requires a lot of resources. This is the obstacle that a lot of people with great ideas never manage to overcome. So, here are a couple of ideas you can use in order to finance your startup if you’re starting with virtually no funds.
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Borrowing from friends and relatives
The first thing you need to consider is funding the startup with your own money. This is risky and difficult but, in the end, it leaves all the equity firmly in your hands. Keep in mind that you can dip into your personal savings, sell an asset, or even take on personal debt in order to finance your enterprise.
Other than this, you can also ask your friends and family members to lend you money. After all, about 38% of all startups get funded this way. These don’t necessarily have to be people you know. In fact, you can reach out to private investors and try to “sell” them the idea. The problem is that you have to make a personal agreement/contract, as well as the fact that finding people with enough money (and who are willing to help) is not easy.
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Look for private lenders
Chances are that if you plan to start a business, you will have to look for a loan. Now, if you get decent loan terms, you get to keep the equity in your business without potentially putting a strain on your valuable personal relationships.
There are a lot of commercial business loans in Australia worth considering but you first need to learn a thing or two about crucial loan terms. What you’re looking for are the APR, loan term duration, additional fees (origination fee, early repayment fee, etc.), and maximum loan amount. It is also worth checking out industry averages and shopping around a bit in order to make sure that you’ve got the best possible deal.
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Look for a partner
Finding a partner is usually a smart move when trying to fund a business but there are more layers to finding the right partner than just finding someone willing to step in. Remember, when you accept money for someone in exchange for equity, you no longer own the entirety of the business. This can also be a good thing, seeing as how you get someone who will share risks and responsibilities with you.
When looking for a partner, you need to be motivated by more than just money. Finding someone who shares your interests is easy. After all, everyone’s interests in the business world are (more or less) the same. The trick is to find someone who shares your vision. This is something that won’t come easy.
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Angel investors and venture capitalists
If you’re really convinced that your idea is great and think that you need a hefty investment to make it come to life, you might want to look for bigger investors. This is the option available only for the most promising enterprises.
Remember that they will take their share of equity but they will also provide more than just funding. They might also offer contacts and even useful advice. Keep in mind that these people are experienced and well-connected, which is huge for someone making their first steps in the business world.
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Crowdsourcing
The fact that we live in the 21st century means that we have access to funding formats like crowdsourcing. This is a great option for funding in the earliest stages of the enterprise, especially those businesses in tech-related industries. Here, you can just offer an idea and wait for people who want to see it come to life to contribute as much as they’re willing to part with. These are usually micro-investments but the volume of these investments adds up quite nicely.
The biggest challenge with this lies in finding a way to present your idea in the right light. After all, there are so many great ideas that failed because of the way they were presented. Then again, that one guy on Kickstarter managed to get $55,492 to make a potato salad. It’s all about the way you are able to sell it.
Conclusion
In the end, bear in mind that every time you invest money in a business, you’re agreeing to a sort of obligation. If you’re taking money from your personal savings account, you need to refill it when the startup income starts rolling. When borrowing money from a lender, you need to make sure your business generates enough profit for you to make these monthly credit payments. This is why you must think carefully before choosing the idea worth funding.
