9 of the Best Startup Financing Methods
Building a business can be difficult, and finding the funding to get everything started might seem impossible for those who are entering blindly into entrepreneurship positions. However, startup financing can be found in several areas in which newcomers might not think to look for funds, but which should be thoroughly explored for potential financial gains and support by anyone who’s serious about their product or service.
Personal financial support for the business is a must. While it might some fairly obvious to some, many aspiring business owners attempt to begin the process with no cash on hand and expect lenders to do the work, which simply won’t cut it in the current economy.
Personal credit lines such as credit cards and loans are another means for generating startup financing. Again, this might seem like a straightforward method, but many people forget that this is indeed an option when it comes to funding a business venture.
Family and friends are great sources of startup income. These groups are normally the most supportive members surrounding the business, and may not mind offering a little startup capital in order to assist the entrepreneur with the process.
Peer-to-peer lending is an avenue which many may not be familiar with. In this arrangement, a small group of entrepreneurs borrow and loan money to one another as needed, and attempt to find a balance which is beneficial to everyone.
Crowdfunding is something that has exploded onto the financing market in recent years. With this, aspiring entrepreneurs can present their ideas to the public as a whole and receive donations from those who wish to see the product or service come to life.
Small loans (also known as microloans) for a maximum of $35,000 are often available from small private lenders or local banks for those who have a difficult time qualifying for other, larger types of commercial financial assistance.
Another option for startup financing is purchase order financing. The owner of the new business will use a third party to purchase a large amount of inventory or other goods. In return, the third party will claim a portion of the profits once the goods are sold.
Factoring accounts receivables works almost identically to the previous financing option, but instead the entrepreneur in question applies the advance towards payments which customers have not yet made. This method simply makes the funds available sooner.
While there are many options for startup financing, these nine methods are some that have been used the most successfully over the years. Always be sure to consider every option before making a final decision for any business endeavor.