Thomas Edison famously stated that success is 10 percent inspiration and 90 percent perspiration. When it comes to a successful entrepreneurial undertaking, hard work and a great idea are undoubtedly essential ingredients, but without the money to realize your goals, ideas and effort will still probably fall short.
Starting with an entrepreneurship degree is a step in the right direction. With this degree you’ll learn how to generate strong ideas, write effective business plans and, most importantly, fund your venture. Your start-up is going to need some cold, hard cash, and unless you’re independently wealthy you will probably need to get creative in order to secure the funding you need. From begging your parents to taking out a loan, here are nine avenues of funding — with variable risks — that will aid you in getting your brand, invention or new business idea out of your head and into the real world.
Small Business Loans
A common way to get funds is through a bank loan, and while you may have to jump through a few hoops in order to secure it, those hoops may benefit you in the long-run. Banks want a solid business plan and predictions about when you’ll turn a profit. All that detail and scrutiny will help ensure you actually know what you’re doing. Some banks will require you to get your loan guaranteed by the Small Business Association before approval — one more step that indicates you’re on the right track.
This category of financing only works for someone who owns a house, and while getting a home equity loan can seem like easy money, if your business fails, keep in mind that you may also lose your house.
Making use of crowd funding for capital is becoming increasingly popular. From Kickstarter to Indiegogo, the general public can be enticed to use their own hard-earned cash to get your ideas, businesses and innovations off the ground. If you have an idea that can excite and benefit the average consumer, crowd sourcing might work wonders for you.
Angel investors are entrepreneurs who have already made their fortunes and are looking for other endeavors to fund and help grow. While angel investors have money to invest, the advantages of working with one are much more than financial. From advice and mentoring to connections and networking, a good angel investor will both fund and mentor you.
Friends and Family
Few people want you to succeed as much as your family and friends do. If you come from a wealthy family, or if you have friends with extra dough, see if they’re willing to give you a loan. While it may seem anti-familial to do so, if you go this funding route, be sure to draw up a contract so everyone is on the same page with what is expected in regards to repayment, timing, interest rates and the like. It will protect your relationships, yourself and your loved ones over the long haul.
Venture capitalists are investors who give money to a business in its earliest stages, usually in exchange for equity in the start-up. However, it’s becoming more common for equity and a measure of debt financing to be part of a venture capital deal.
Take on a Partner
Joining forces with a well-heeled partner can certainly solve some of your financial headaches, which will likely be the root of all problems. That being said, taking on a partner also means you’ll have to make decisions together. In other words, if you go this route: be wise, shrewd and cautious about your partner decision.
If your business can exist and operate on your own money, the money it generates and sweat, then by all means, let it do so. Bootstrapping isn’t easy, and it requires some heavy mettle, but it will keep you out of debt and ensure that you don’t have to give up any control.
Using credit cards to fund your business should only be an initial — and temporary — fix, and some would say credit cards shouldn’t be utilized at all. Because interest rates are so high — sometimes over 20 percent — you need to have a plan in place to either pay off the credit card in a timely fashion or secure funding from another source with a more amenable interest rate.
Starting a business, developing an application, promoting a dream — all of these are exciting aspects of entrepreneurship that need money. Depending on how averse you are to certain types of risk, the chances are pretty good that you can figure out how to fund your start-up. Just make sure you’ve looked and considered the consequences, before you take the funding leap.