Loan or Investment? How to Fund Your Startup
Looking for a way to fund your startup? Let’s take a look at a few types of loans and investments that may or may not be practical options for you.
If you’re looking for a bank loan, first understand that your chances are not great—in the last three months of 2011 alone, banks reduced business loans by almost $5 billion.
That said, data from 2012 so far suggests that business bank loans are on the slow but steady rise. If you plan to go after a bank loan, do what you can to get your business in order as much as possible; having a solid business plan will make you a much more attractive investment than a business that lacks direction.
Also known as accredited investors, angel investors are, essentially, people who are rich enough to have been accredited.
An angel investor could be the answer to your startup funding problems—but, time permitting, it’s generally best to exhaust your other options first, unless you’re fine with your investor holding a hefty stake in your project. (As Mike Skinner once said: a grand don’t come for free.)
Thanks to the JOBS act Obama signed recently, you no longer have to be stinkin’ rich to invest in a company. Now, private investors can get into the action as well, which means you can cast your net a lot wider than you could before!
This new source of revenue is spreading like wildfire, spearheaded by the likes of Kickstarter. Crowdfunding makes it simple for anyone to “invest” any amount of money—$20, $50, $200; anything—toward the completion of a project or business.
Investors (everyday people like you and me, mind you) can browse through the project and pledge money toward one they would like to see funded. When the goal is reached, the money goes through Kickstarter. And if the goal isn’t reached by the specified date, that’s it—no money changes hands.
Do I have any other options for financing my business?
Of course! Keep in mind that investments and loans aren’t the only way to fund your business. Take a look at our last post, “Meet the Financial Needs of Your Business,” for more tips and information!