How To Create and Choose a Startup Funding Model

Coming up with the cash to start your business may prove to be difficult, especially if you’re new to the scene. Traditional lenders have reported a decline in small business loans over the past few years, with the number of loan originations dipping by 20 percent. While startups still dominate the modern business landscape, they are somehow finding alternative funding alternatives. When considering what route to go, your options may depend on factors like credit score, the amount you need and what you will do to get it.

Utilizing Credit Cards

If you have less-than-stellar credit, there’s a chance you will still be able to find a credit card company willing to issue you something. The limit may not be enough to meet your initial needs, but it can help you get started. The drawback to this route is the higher payments you will most likely face in the months following any expiration of an introductory APR.

Getting a Traditional Loan

Business loans can be a sure-fire way to get the capital you need to get your idea from paper to fruition. However, if your credit isn’t up to snuff, you may not qualify for anything. Sub-prime loans still exist, but they offer startups high-interest rates with strict repayment terms. If your credit is perfect or you have assets, you stand a better shot of getting traditional business loans.

Asking People You Know

You may have a circle of friends who don’t have a problem lending money to friends. Before you hit your friends and family up, though, remember that these relationships may make any hardship you potentially face tricky. Startups experience a lot of lows especially through the first year or more. Therefore, you may not be able to repay the money until after that. Insist on a legal contract if you go this way, so your investors won’t expect payment for a while.

Finding Venture Capitalists

Some people enjoy dropping wads of cash to invest in a business they believe has loads of potential. If your business plan is solid and you can pitch it well, venture capitalists may be your saving grace. However, if you don’t have much experience, they may not want to take a chance unless they see a real opportunity to get in on the ground level of something big.

Finding financing for startups isn’t what it used to be, but if you’re striking out with a solid plan, you may be able to find sources of cash in one of the choices here.


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