The majority of startup businesses are often funded by the founders themselves, especially at the beginning before any results have been proven.
Getting financing for a small new business from banks and professional investors can be very difficult or almost impossible, so entrepreneurs normally have to rely on people they know or their own savings and assets to fund their new ventures.
The question of how to raise this initial seed financing will depend on your personal financial circumstances and your outlook when it comes to money.
Some entrepreneurs believe in using other people’s money before putting their own hard earned cash at risk, while others would prefer to use their own resources instead of asking friends and family for help. On balance, the best solution may be to use a mix of both your own funds together with loans or investments from people who know you.
Here are 10 common funding options that startup companies use to finance their new businesses:
PERSONAL MONEY
1. Savings - Founders can use savings from fixed deposits, Certificates of Deposits and other cash equivalents to finance the business.
2. Investments - Founders can also sell any assets such as stocks, bonds and other investments to raise cash to fund the startup.
3. Home Loan- If necessary, founders can use their homes as security to get a mortgage or home equity loan from banks and other lenders.
4. Credit Cards - A common startup financing source are credit cards. Founders can take cash advances and pay for company expenses from personal credit cards.
5. Personal Loans – Another source of cash for founders is to get other forms of secured or unsecured personal loans which may be available depending on your credit rating.
PEOPLE WHO KNOW YOU
6. Family – Apart from your own money, family members are normally the first port of call when it comes to getting loans or investments for your startup business.
7. Friends – In some cases, friends may be the first option, but either way, friends and family are the best candidates for believing in you and your business.
PARTIES RELATED TO THE COMPANY
8. Employees – For some startups, certain employees or members of the management may receive reduced compensation or have salaries owed to them during the pre-funding phase.
9. Suppliers – In other situations, some businesses may be able to get long term credit for inventory from suppliers or extended payment terms from vendors and service providers.
10. Customers- Deposits and pre-payments from customers can also serve as a startup financing option for certain types of companies.