If you need capital to launch your new business, this post will show you 5 startup funding options that are best for first-time entrepreneurs.
- Save as much money as you can until you are ready to launch
- Explore friends & family, grants, incubators, angel investors, and SBA loans
- Put your capital to work and grow your sales and profits
Starting your own business is both exciting and terrifying. For many, it means gathering up a large sum of money to cover startup costs of opening a business, building a product, and making the sale. Whether your business is eCommerce or healthcare, products or services, you’ll be seeking out investors or lenders to help with startup funding.
As you look to navigate startup funding options, here are some areas you can look into.
#1. Friends and family
Raising capital from friends and family for a startup business can be a great first step.
The terms of your arrangement are generally more favorable, and you may not have strict terms and conditions as you will with professional investors.
The major risk though is that you could hurt your relationships should the business not deliver results or you never reimburse your friends and family for their investment.
It’s best to set clear expectations when seeking startup finding from your friends and family to ensure you don’t lose the people you’re closest to throughout your startup experience.
2. Startup Business Grants
Much like borrowing money from friends and family, small business grants often have favorable terms when it comes to repayment.
With grants, you receive free funding from the government or other organizations seeking to promote entrepreneurship.
The catch with grants is that you often have to set forth specifics on how you use that money.
This means you can’t reallocate it in cases of emergency when business doesn’t go as planned. You may still need to find funding elsewhere when you receive a grant to help pay for other areas of your business that the grant does not cover.
Check out the SBIR website for grant opportunities.
3. Accelerators and Incubators
Accelerators and incubators are groups designed to promote startups. They can provide crucial startup benefits, such as mentors and workspace.
You might have an accelerator or incubator in your community that you can pitch your startup business idea to.
Be prepared to offer an equity stake in your company if seeking financial support from one of these groups.
Startup businesses can benefit from using an accelerator or incubator because you often get input from business owners who have been there.
They’ve been through the difficult process of starting a business and can serve as an advisor to your company as you work to grow
4. Angel Investors
Seeking funding from an angel investor means seeking out individuals who have the capital they can directly invest in your company. Angel investors are often business owners or executives that have a high net worth and can afford to invest a large chunk of money in your business.
When you start an angel investor relationship, you’ll often have a closer personal relationship with your investor than you would with a banker or venture capitalist.
This means you get added mentorship to help grow your business if you want and need it.
5. Small Business Administration (SBA) Loans
The Small Business Administration (SBA) works as a third party between small businesses and lenders to ensure favorable and fair loan terms.
While SBA doesn’t directly offer loans to businesses, they do serve as an important intermediary to make sure small businesses are protected.
Using the SBA’s network of small business loan providers makes it easier for you to find the support you need for your business.
You can search the lender network for an organization that will provide startup funding to your business in a way that works right for you.
There are many ways to get startup funding, but there is no perfect fit that we can recommend.
Test the waters, pitch your business to the right audience, keep working hard, and you too can have a funded startup business soon.