Top 10 Ways to Fund Your Startup

Top 10 Ways to Fund Your Startup

One of the top concerns for entrepreneurs who have a killer business idea is how to fund their business to bring their idea to market. In looking for ways to fund a new business, you as need to keep your goals for the business in mind, including how much control you are willing to concede to investors. You must also keep your capital costs in line with your business model.

Here are the top 10 ways to fund a startup:

1. Venture capital.

Raising capital from a venture capital firm is one common way to fund your new business but means ceding control to the outside firm by giving them a percentage stake in your business. This also means that you will likely have input from the venture capital firm on how to run the business, so be sure you are comfortable with others’ input before taking this route.

2. Equity financing.

If you need a large amount of capital for your new business, equity financing may be a good way for you to raise it. You will be bound by federal securities laws and other capital regulations, and will have shareholders to contend with as you build your business.

3. Equity crowdfunding.

Equity crowdfunding came about courtesy of the Jumpstart Our Business Startups (JOBS) Act, and involves offering shares in your company to the general public without having to deal with onerous federal securities laws and other regulations. There are restrictions on how much you are allowed to raise via this method annually and some reporting requirements you must fulfill as well.

4. Partners.

Seeking partners to help fund your business may compromise your operational freedom, but can also be a good way to tap into the knowledge and resources of other experienced business people.

5. Angel investors.

Angel investors are usually people who choose to invest in a company for personal rather than business reasons, and are usually not involved in the daily operations of the business. In exchange for their investment, angel investors are generally given a share of the company.

6. Family and friends.

Many small companies are able to get start with money borrowed from family and friends, usually as a loan to be repaid over time. Just be sure that if you elect to go this route, it will not create any personal issues down the road.

7. Your own money.

Using your personal savings to start your business means you get to maintain complete control over your business and don’t have to make interest payments to yourself for a loan. The biggest risk is losing your money if the business doesn’t work out.

8. Government grant.

If you are a minority, veteran or fall into another special category, you may qualify for a government grant to start your business. These grants typically do not need to be repaid, but are fairly rare and difficult to obtain.

9. Small business loan.

One of the most common ways to fund a startup is through a small business loan, either through your local bank or the Small Business Administration. You will typically need to have good personal credit and a solid business plan to qualify. Most banks will also require you to provide a personal guarantee on the business loan.

10. Non-equity crowdfunding.

Internet-based crowdfunding sites like Kickstarter and Quirky have allowed many entrepreneurs to fund their startups and get a product to market quickly. These are rewards-based funding sites, where investors are given a product or other “gift” in exchange for their investments — they do not get shares in the company or provide loans to be repaid.

A business attorney can be an invaluable asset to those starting their own businesses. Contact one of the experienced Florida business attorneys at Jurado & Farshchian, P.L., at (305) 921-0440, or email us at info@jflawfirm.com.

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