There are plenty of books on how to
finance a startup company. Sadly, many of them include suggestions
and strategies that just arenít realistic enough to be effective.
Meanwhile, back in the real world of entrepreneurship, plenty of
owners get the job done every day, finding ways to pay for all the
assorted expenses of opening the
doors to a new enterprise.
How do they do it? It might be a shock
to some, but most of the successful startups use old-fashioned
techniques for raising money. Things like traditional bank loans,
leveraging credit cards, chopping out a few monthly expenses, and
tracking down angel investors are among the most common. However,
strategies that include
newer approaches like crowdfunding are also a big part of the
quest for capital among modern day entrepreneurs. Here are some
tried and true ways that new business owners raise money to get the
ball rolling for their new entities.
Secure a Business
Getting a bank loan is one of the most
popular ways for new owners to acquire needed capital. If your
credit scores are at least decent, you can usually get the cash you
need at a fair interest rate from a lender you already know.
However, it makes good sense to shop around for deals because your
own bank might not offer the lowest interest rates or best terms in
Use Credit Cards
For many entrepreneurs, putting
startup expenses on personal credit cards can seem like the option.
In fact, you shouldnít opt for this tactic unless all the others
have failed you. Credit card debt is expensive and adds up fast.
Once youíre unable to pay the statement balance, the debt carried
over each month will continue to build up costly interest. So, after
youíve exhausted every other avenue of financing, yank out the
plastic. But remember to pay off the debt as quickly as possible to
avoid getting hit with interest charges.
Cut Monthly Personal
One of the smarter ways to free up
money in your personal budget is to refinance student loans. Youíll
save plenty with lower monthly payments but also get the benefit of
longer time to repay and lower interest rates on the refi
agreement. When it comes to refinancing student debt, entrepreneurs
canít do much better. Combined with other strategies for raising
capital, a refi package is an effective technique.
Crowdfunding is a crap shoot in many
ways, especially for new owners who are unfamiliar with the way the
process works. Even so, plenty of new companies got their initial
capital inflow from crowdfunding projects. If you plan to go this
route, hire someone with experience to assist you.
Shop for Angel
In addition to taking out personal
loans, getting cash from angel investors is one of the most popular
ways to finance a startup. There are agencies that specialize in
identify angel investors, but the process is slow and does cost
money. Many entrepreneurs, especially those in no hurry to open
their doors, spend several months searching for investors that fit
your specific needs.