Whether you’re opening a local store or entering into a fully online venture, launching a startup venture has never been easier. Thanks to affordable online business services and applications, such as Square, Shopify, or Amazon Web services, everything that you need to start your own business is available at the tip of your fingers. Everything, that is, except funding.
Chances are at the beginning of any startup venture you’ll need to acquire capital to grow, especially if your venture gains traction. According to data acquired by the Houston Chronicle, it takes about two to three years for a company to become profitable, and even then that is heavily dependent on the startup’s costs.
Most people looking to start a business don’t have the funds reserved to keep their business afloat until it becomes profitable, and in this case, turn to funds. Funding is a great way to secure enough capital for your business to take flight. Below, we’ve put together five ways you can fund your startup venture.
1. Join a startup incubator or accelerator
There has been a huge increase in startup incubators and accelerators popping up across the country, especially in towns where there’s a high university presence. Startup incubators and accelerators provide spaces for entrepreneurs to gather so they may mingle and brainstorm about their startup plans. There’s an emphasis on mentorship in these spaces too, as their main goal is to help as many startup ventures get their feet off the ground as possible.
2. Consider leveraging home equity
If you own your home, you can leverage your equity in your home to help fund your startup venture. In order to do so, you will most likely have to take a second mortgage out on your house, which is also known as a home equity loan or a home equity line of credit (HELOC). If you are to take a home equity loan out, you’ll pay more each month as you’ll be repaying both the principal and interest.
A HELOC is more similar to how you use your credit card, you can borrow against the HELOC up to a predetermined amount of money, for a period of time, usually between 5 and 10. However, you’re only charged interest when you make the withdrawals, so your monthly payments will be much lower if you haven’t tapped into your credit line.
While most mortgage lenders don’t want to see you or your business fail, the biggest risk in using a HELOC or home equity loan to fund your business is that if the business were to default, there is potential for your house to be foreclosed on as that is the equity you’ve given over.
Another option for senior homeowners is a reverse mortgage. With a reverse mortgage, you’ll get paid monthly sums, which can help you while you’re getting your business off the ground. Check out this reverse mortgage calculator to see how much you could get if you qualify.
3. Reach out to relevant angel investors
Angel investors are high-net-worth individuals who invest in startups, provide quick funding, and in return usually request a percentage of equity and or royalties from your company. But along with this financing, angel investors typically offer great advice and recommendations to help build upon the success of your startup. Companies such as Uber and Google were first started in large part thanks to helping from their angel investors. Angel investors understand the high risk in investing in your startup, but if they’ve chosen you it’s because they recognize there is a high reward potential as well.
4. Start a crowdfunding or GoFundMe campaign
Crowdfunding or GoFundMe campaigns have become incredibly popular over the past few years. These options allow you to borrow money from a large pool of investors and can even be shared on websites and social media platforms to reach locals who may want to help your campaign succeed. The hardest part about crowdfunding is making your message clear and precise, while also engaging with a large and sometimes random audience. Be sure your campaign is equipped with detailed messages about what your startup venture entails, goals and objectives, and the successful future you see ahead for your business endeavor.
5. Apply for a business loan
Business loans from large banking institutions are generally how most entrepreneurs first attempt to secure funding. There are some banks that even offer loans specifically catered towards small business needs. However, banks are always going to be careful about who and what they’re lending money to. In order to qualify for a business loan, banks typically require paperwork such as a business plan, facility plans if you’re opening a brick and mortar, your credit score and businesses credit scores, etc.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any financial decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.