Startup Funding Explained: How to Secure Capital

Have you ever thought about starting your own business? Whether you have a unique product or want to create your own social media platform, the capital has to come from somewhere. Obtaining startup funding is a pivotal step in developing a business, and there are three basic ways to accomplish it. 

How to start a business

Starting a viable business takes time. While you may have heard of overnight success stories, typical new market entities only thrive after careful planning. Aspiring entrepreneurs not only think of profitable ideas, but they also formulate structured plans for startup funding. 

If you want to start a business from scratch, be prepared to do the following steps:

1- Research the market.
2- Write a thorough business plan.
3- Secure capital.
4- Pick a location.
5- Decide on a specific business structure.
6- Select a name.
7- Register the business.
8- Get federal and state tax IDs.
9- Apply for licenses and permits.
10- Open a business account for banking.

Options for startup funding

Funding a startup business happens in three ways: self-funding, by investors, or through loans. 

Self-funding uses personal resources to support the business. An entrepreneur reaches out to friends and family for money or taps into outlets such as 401k, savings, and grants. Self-funders, otherwise known as bootstrappers, are closely invested in their business. It is because the money comes directly from their pocket. 

On the other hand, startups have another option called venture capitalism. They seek to find investors in exchange for part of the company. Many entrepreneurs do well under this method because it provides access to resources they did not have before. You most likely viewed examples on television, especially if you watched ABC’s Shark Tank

Lastly, the third option uses loans to secure financing. This method involves interest, but at least the owner keeps 100% leadership over their company. To decide on a loan holder, entrepreneurs will need to compare rates. Furthermore, they should seek flexible banking options to meet the startup’s financial needs.

Crowdfunding, a caveat to a fourth option

Crowdfunding has become popular as of late. It works uniquely to provide startup capital. It is not a loan, and owners do not produce their own funds. Instead, crowdfunding presents an idea, and the population freely decides if they want to support it. 

Through this method, gaining capital is not guaranteed. As a result, many entrepreneurs use crowdfunding as a last resort.

How grants help with startup funding

The final portion of our article regards grants. There are thousands available, depending on a startup’s qualifications. Examples include benefits for service-disabled veterans, rural business enterprises, and more. It is better to apply directly through the governmental system or with parties you already trust when applying for a grant. 

Grants are funding from the government for projects that provide public services or stimulate the economy. They are a form of federal financial assistance. You do not have to pay back a grant. Also, you can apply for several at a time.

Questions regarding business lending

The innovations of tomorrow will succeed with the proper startup funding of today. To learn more about small business loans, contact the Business Lending Department at Achieva. We look forward to hearing from you!

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