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Having a big, billion-dollar idea for a new company or start-up is great—but now what? You probably need a website, a tech team, some office space, and, of course, at least enough cash coming in each month to pay your rent. Which means, you need money. Whether it’s a cool new app or a swanky café, most businesses and most entrepreneurs require at least a little bit of funding to really get off the ground in their early days.
1 Begin With Bootstrapping
When first getting started, many entrepreneurs use “bootstrapping,” which means financing your company by scraping together any personal funds you can find. This typically includes your savings account, credit cards, and any home equity lines you may have.
In many cases, using the money you have instead of borrowing or raising is a great approach—in fact, some entrepreneurs continue to bootstrap until their business is profitable. This can be beneficial because it means you won’t have extensive loans and monthly payments that bog you down, especially if you run into snags along the way.
But, if you’re looking to scale your business quickly, it can be advantageous to bring in outside sources of funding. So, what happens when your funds run out, or you decide you need something more? That will ultimately depend on the type of business you’re building, but there are some common places to start.
2 Consider Friends and Family
Asking your friends and family for money might seem like a daunting prospect—but tapping those closest to you is often a good first step before getting external funding. And hey, it can never hurt to ask. While Aunt Irene is probably not in a position to finance your entire new social network for dog owners, she may be impressed enough to toss you a couple grand to help you get rolling (and join the site to find Fido some new playmates).
Before you ask your friends and family for money, though, you should have a business plan at the ready. This way, you can explain to them exactly what you’re selling, what you plan on charging, how you’ll make money, and whether you’re asking for a loan, an investment, or a gift (i.e., whether or not they should expect to get back any money they put into your business, and if so, how much).
3 Explore Alternative Funding Sources
If you’re looking for a relatively small amount of money (anywhere from $25 to $5,000), there are quite a few micro-loan organizations that lend to start-ups and entrepreneurs, such as Kiva and Accion. These websites cater to low-income entrepreneurs in the U.S. or those working for social good (and some only provide micro-loans to those living below the poverty line). But if you think you might qualify, check out their websites for more information.
Another alternative are the increasingly popular crowd-funding sites, such as Kickstarter and IndieGoGo, which provide you a platform to raise money from individual, small supporters across the web. You’ll set up a campaign and name a target amount of money you want to raise, as well as create perks for donors who pledge a certain amount of money. Then, you raise money for the campaign over a specified time period. With Kickstarter, you’ll only get to keep the money if you raise the full amount of your goal, but IndieGoGo will let you keep anything you raise (for a cut of the proceeds). For more info, check out our guide to choosing between the two and maximizing your crowd-funding campaign.
1 Begin With Bootstrapping
When first getting started, many entrepreneurs use “bootstrapping,” which means financing your company by scraping together any personal funds you can find. This typically includes your savings account, credit cards, and any home equity lines you may have.
In many cases, using the money you have instead of borrowing or raising is a great approach—in fact, some entrepreneurs continue to bootstrap until their business is profitable. This can be beneficial because it means you won’t have extensive loans and monthly payments that bog you down, especially if you run into snags along the way.
But, if you’re looking to scale your business quickly, it can be advantageous to bring in outside sources of funding. So, what happens when your funds run out, or you decide you need something more? That will ultimately depend on the type of business you’re building, but there are some common places to start.
2 Consider Friends and Family
Asking your friends and family for money might seem like a daunting prospect—but tapping those closest to you is often a good first step before getting external funding. And hey, it can never hurt to ask. While Aunt Irene is probably not in a position to finance your entire new social network for dog owners, she may be impressed enough to toss you a couple grand to help you get rolling (and join the site to find Fido some new playmates).
Before you ask your friends and family for money, though, you should have a business plan at the ready. This way, you can explain to them exactly what you’re selling, what you plan on charging, how you’ll make money, and whether you’re asking for a loan, an investment, or a gift (i.e., whether or not they should expect to get back any money they put into your business, and if so, how much).
3 Explore Alternative Funding Sources
If you’re looking for a relatively small amount of money (anywhere from $25 to $5,000), there are quite a few micro-loan organizations that lend to start-ups and entrepreneurs, such as Kiva and Accion. These websites cater to low-income entrepreneurs in the U.S. or those working for social good (and some only provide micro-loans to those living below the poverty line). But if you think you might qualify, check out their websites for more information.
Another alternative are the increasingly popular crowd-funding sites, such as Kickstarter and IndieGoGo, which provide you a platform to raise money from individual, small supporters across the web. You’ll set up a campaign and name a target amount of money you want to raise, as well as create perks for donors who pledge a certain amount of money. Then, you raise money for the campaign over a specified time period. With Kickstarter, you’ll only get to keep the money if you raise the full amount of your goal, but IndieGoGo will let you keep anything you raise (for a cut of the proceeds). For more info, check out our guide to choosing between the two and maximizing your crowd-funding campaign.