Have you ever thought about starting your own business? Whether you have a unique product or you want to create your own social media platform, the capital has to come from somewhere. Obtaining startup funding is a pivotal step to 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, the majority of 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, investors, or 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 401ks, savings, and grants. Self-funders, otherwise known as bootstrappers, are closely invested in their business. This is because the money comes directly from their pocket.
On the other hand, startups have another option. It’s called venture capitalism. They seek to find investors in exchange for part of the company. In most cases, they do not have to pay the money back unless the deal requires a form of royalty. Many entrepreneurs do well under this method. It provides access and resources they did not have before. You most likely viewed examples on television, especially if you watch 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’s not a loan, owners don’t give up any of their company, and they also aren’t producing their own funds. Instead, crowdfunding presents an idea, and the population freely decides if they want to support it.
Crowdfunders choose the amount they want to give a recipient. Sometimes, the recipient disburses a gift; however, it’s not required. 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. When applying for a grant, it is better to work directly through the governmental system or only with parties you trust.
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 a small business loan, please contact Achieva Credit Union’s Business Lenders. We look forward to hearing from you.