Five Creative Ways To Finance Your New Business
As an entrepreneur, you're open-minded and probably quite resourceful when it comes to getting what you want. But finding clever ways to finance a business can be challenging and often requires that you hunt down multiple sources. Whether you need the money for office space or software and product development, here are five creative ways to get the capital required to get your new business off the ground.
Seek an Angel Investor
Most people think of an angel as a lifesaver. And when it comes to having an investor for your business, that's exactly what they are. Angel investors are wealthy individuals who believe in your business and the future of your product, and essentially want to know that in the great scheme of things, they are making a difference.
Because they are not "in it to win it," meaning they will not get back what they invest, it's important to understand exactly what they will gain from investing in your company. This will improve your odds of winning them over. For instance, if you need funding for a day care business, you'll want to find an angel investor who is passionate about children and families and will feel good about helping you run a company that is family oriented.
Lease Instead of Buy
Whether you need heavy machinery for new construction or plan to have a roomful of computers for your business, heavy equipment leasing instead of purchasing equipment is a great way to bring down business costs. Monthly rates are typically cheaper than when you buy, making this a tremendous advantage over purchasing large equipment. Many banks and companies will provide the funding for short-term as well as long-term leases. So you could use the equipment for 3-6 months or 3-6 years, depending on needs.
Because your business obviously doesn't have any sort of credit established, some finance companies will make the loan based on your personal credit history, so be prepared to offer that information up.
Presell Your Product
How much money do you think you could make if you started selling your product before you even open shop? It seems like a crazy concept, but just suppose that you have the funds to make 200 units of your product. If you're able to sell all 200 units, you could net a profit that would allow you to make 400 more.
Getting decent traffic to your website and establishing a presence on social media will certainly help you to meet your goals. This is exactly what Priska Diaz had to do after coming up with the idea for her air-free baby bottle. Before major investors and retailers would even listen to her pitch, she had to prove that there was an interest in her product. She got an interest all right. Her presell efforts earned her enough to keep making more, and she now runs a highly successful business.
Enter a Business Plan Competition
Monetary winnings from a strategically played competition can mean the difference between business launch and complete bust as Jen Barnett learned. She won more than $80,000 worth of capital that helped fund her food marketplace in 2011.
A business plan competition allows you to not only go up against other business owners but also to network with them and learn a plethora of effective business and marketing strategies. It can even provide you with practice at wooing potential investors down the road. Most people who enter these competitions agree that the feedback they get from the judges is worth more than anything.
To find available contests, start in your hometown and network with similar entrepreneurs. From there, check local colleges and universities and then national and global corporations.
Start a Crowdfunding Campaign
Crowdfunding is the new wave of seeking investors for almost anything. Entrepreneurs utilize an online platform to create an account and announce what they are raising funds for. It allows an infinite number of people to pitch in small (or large) amounts of money for a product or business that they believe in. Account creators can reward those who donate in various ways, like offering them some sort of public recognition or by giving them a physical product once the business opens.
Does it work? While it's not a guarantee, it absolutely does work for many. And when it does, it works big. Check out this article which discusses a company called Yes Man Watches that was able to raise $15,000 within the first three days of their crowdfunding campaign on Kickstarter.
There's also peace of mind for those who donate: if the account creator doesn't meet their financial goal--meaning they don't get enough investors--no one has to pay. So it's somewhat of a risk-free concept for those who want to contribute to something that is sure to take off.