How to Raise Money for a New Business

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How to Raise Money for a New Business

Money is the life-blood of any business, even a non-profit. So, how can new owners of small entities get the cash they need to start out? It’s an old question with plenty of fresh answers, thanks to the computer age and several new laws that allow people to take risks on new companies.

Most business owners begin their corporate life with a traditional bank loan, one that is often secured by their homes or other hard assets. But what happens when the owner is young and has no measurable assets to use as collateral? That’s when it’s time to turn to alternative financing methods. Though a personal loan can be used to fund a startup, many entrepreneurs have no assets and have a hard time qualifying for any kind of loan.

Here are some of the most-used and most effective ways to raise funds for your new business when bank loans are out of the question:

Crowdfunding

It only takes a few hours of your time and a good pitch to start a crowdfunding campaign. There are numerous options for business owners who want to ask the cyber-public for funding. Numerous large firms started their existence with crowdfunded money, and the approach is becoming more common for micro-businesses. In order to succeed, you’ll need to know your way around the Internet, understand how to promote your company to multiple audiences, and the perseverance to handle a slow ramp-up period, crowdfunding might be the best way to go.

Business Credit Cards

Would you lend money to yourself? That’s basically what people do who opt for this method. If you already have decent personal credit and minimal assets you can easily obtain a business credit card with a low introductory rate. Card in hand, you’ll be able to purchase supplies and services to get your mini-company off the ground. The willingness to start out small and put your own “skin in the game” is the key to making this method work. There’s a bonus: Once you have some of your own funds at risk, lender will be more willing to offer you small loans. Many business owners use this approach combined with crowdfunding in order to get off the ground.

Personal Networking

One of the oldest and most reliable ways to get financial backing for a business is to ask friends and family for their help. Some of the best-known firms in the world today began with nothing more than a small cash loan from a family member or close friend. If you can’t sell your idea to the people who know you best, how will you be able to earn the confidence of strangers? In any case, turning to relatives and acquaintances for funds is a financing strategy that works well in conjunction with crowdfunding.

Purchase Order Financing

If your company sells products rather than services and your typical sales margin is 20 percent or greater, there are purchase-order lenders who will front you the money needed to produce the order. Sometimes these loans can make the difference between solvency and closure. There’s a strong upside to this type of financing. If you’re able to successfully produce and sell the order, your lender will be willing to loan you even more the second time around.