How to Raise Money for a Startup Business: 5 Alternatives to a Bank Loan

Fleeting idea or million-dollar opportunity?

Airbnb, Instagram, Angry Birds, Uber, and more all began as simple startup ideas. It took courage and fierce determination for those ideas to grow into the multi-millionaire businesses they are today.

If you’re wondering how to raise money for a startup, that means you’re sitting on an idea that could be worth millions. However, the sad truth is that many entrepreneurs fail at turning their vision into reality. A shocking 9 out of 10 startups fail, with a lack of funding being one of the main reasons.

The successful 10% of startups overcome failure because they’re resourceful. There are opportunities for your business almost everywhere you turn, but you have to know how to look for them. Read on to find out about 5 ways to get your startup the funding it needs, and more.

1. How to Raise Money for a Startup Yourself

Let’s start by looking at how to raise money for a startup by funding things yourself. Self-funding for startup companies is a popular approach when a business is just starting. The founders of the company or the current team members can pool together their funds to begin the startup.

It helps if the founders or team members have savings or assets that can go towards the costs of beginning the business. Along with self-funding, you can reach out to companies like JC Venture Capital for professional guidance.  The more proactive steps you take to support your idea, the better you’ll come across to investors.

Potential investors will be happy to see that you’re so serious about this venture that you put your own money into play. Putting your funds into the project shows that you believe in your idea and that the risk is worth taking.

2. Lean Startup Options

You may be setting unnecessary goals when it comes to getting funding for your startup. Rather than trying to get large amounts of money, consider taking a lean startup approach.

Depending on the type of company you’re looking to build, oftentimes, starting small is the best option. When you start small, you can slowly grow the startup with your own money, while simultaneously working another job.

Now a multi-millionaire, Chuck Cohn is a great example of starting small and slowly growing your way to success. When Chuck began his tutoring service he kept his job and put in his own money.

He didn’t quit his job until he felt his business had grown enough to justify doing so. According to Chuck, it’s better to put in as much of your own money as possible and keep things lean when you’re first starting.

3. Share Risks and Profits

If your company relies on employees to operate, you have an opportunity to raise funds with their help. One of the hardest things entrepreneurs face is trying to convince talented workers to join their team—and stay on board—even when the company’s not profitable as of yet.

Instead of paying your employees a market salary, you can offer them an opportunity to earn equity incentives. Sharing risk with an employee is a great tool to use while you’re waiting to get funding or for your product to start gaining momentum in the market.

Be upfront with your potential new-hires about the risks of joining your young company. However, also paint a picture for them of the rewards they’ll be able to enjoy if and when the business becomes successful.

4. Crowdfunding Options

Crowdfunding is a powerful way to gather up the funds you need to manufacture new technology at a fast rate or complete an artistic vision. Here are a few of the different types of crowdfunding options you’ll have:

• Investment-based
• Loan-based
• Donation-based
• Reward-based

Investment-Based crowdfunding gives the investor a stake in your startup, such as shares. For loan-based crowdfunding, you’ll be receiving loans from individuals or companies with a set interest rate.

Next, donation-based crowdfunding involves people donating to your startup. Usually, donation-based options only apply if you’re starting a non-profit or a company that’s targeting a specific cause.

Finally, we come to reward-based crowdfunding, where you give a reward to the people who send funds to your company. For example, you could promise to name a product after the highest contributor or send them a thank you package. It’s best to select a form of crowdfunding that directly suits your business needs.

5. Reach out to People You Know

You really can get by with a little help from your friends. Family, friends, clients, and acquaintances all are great sources for funding your idea. People who know you and what you’re capable of are more likely to invest in what you’re up to.

Say for example that you’re a great dog trainer and you’ve helped tons of people in your neighborhood with their dogs. If you’re starting a professional dog training school, what better place to look for funding than all of your success stories?

People who know that you can carry through on your promises will be glad to have a chance to invest. However, please be careful to make sure that you’re setting realistic expectations with your investors.

Getting loans from people you know only works if they have a general understanding of the risks involved. We suggest targeting people who have at least a little knowledge of business and the risks that go along with investing.

Believe in Yourself

Now you know more about how to raise money for a startup without needing a bank loan. By being resourceful, you’ll begin to find that there are potential investors almost everywhere you turn!

We hope that our article will inspire you to believe in yourself and the power of your startup idea. When you believe in yourself, others will believe in you too, and the possibilities for growth are endless.

For more ways to grow your new company, check out the rest of this site.