Thinking Outside the Funding Box
The three basic ways to fund an entrepreneurial venture are 1) your own savings, 2) finding investors and 3) borrowing the money. When first starting, entrepreneurs usually look for investors and creditors among friends and family, or perhaps former business associates or previous investors. For larger sums of capital, they may turn to organized angel investor groups or bank loans.
But there are other alternatives, and you may want to explore some of them even before the more conventional methods. For example, did you know that you can:
- Use Your IRA to Fund Your Business - With a so-called "self-directed" IRA, you can invest in closely held stock, real estate, oil and gas royalty interests and a variety of other investments.
- Find Grants to Help Fund Your Business - The government may not be handing money out quite as freely as those late-night TV ads want you to believe, but billions of dollars are given out every year to help start and grow a wide variety of businesses.
- Using Private Lenders as Alternative Funding - Where do you go when the bank says "no"? Private lenders can often become valuable advisors to the companies they work with, much like angel or VC investors.
There are so many ways that you can get funding for your business. Explore all your options, and don't give up just because one or two approaches don't work. Of course, any time you get turned down, make sure you take whatever feedback you can get and refine your business plan and pitch before you go to the next one. But don't give up -- if your idea is really worthwhile, you'll find the funding eventually.
Comments
I will add to the self funding list… go through your attic. You may (like me) have tons of “junk” that is worth hundreds or thousands of dollars on ebay. That may be just the seed funding you need.
- Mike
You are not allowed to use a self directed IRA to invest in your own business. I am not a financial advisor but I have looked into this for some clients and was told they couldn’t.
That’s a somewhat gray area, David. You can’t use a self-directed IRA to invest in a business in which you are actively engaged in the day-to-day operations of the business. However, there are some exceptions. If your “business” is investing in real estate, oil & gas, etc., then you can fund your own business. And it also doesn’t place restrictions on ownership, i.e., you can be a majority owner, but just not involved in the day-to-day operations of the business.
I started a marketing business a few years back and, 3 of us at the time, decided we wouldn’t borrow any money but only use what came in from clients. It was slow, but it was a good way to go and it’s possible as a service company.
Seeking funding sources really does mean you need to have a solid business plan and clear understanding of what you’re truly able to earn and when you’re able to earn it.
Actualy anyone when go to start at businesses must to go in safe way and don’t receive borrow because it’ll be minus effect by time & new load by bank interest and expenses but if it free of charges go ahead ( unique Situation )
California is said to have a budget deficit in excess of $20 billion. Keep in mind that California happens to be the world’s fifth largest economy. I believe if California does not solve its indebtedness problem, other areas of the world will also suffer. Like the Internet, I believe the economy of one area connects to that of another. Therefore, I was wondering if there might be some form of Web 2.0 innovation that might assist California in solving its debt problem. If you simply choose to raise taxes, what you are doing is raising the cost of living and at the same time lowering the quality. I am just wondering if there is not some way that advertising and Web 2.0 innovation can merge to help solve this debt crisis before it spreads around the world.
I have investors interested in giving my New Company money but how do I determine how much stock or share to give to them, base of of the money they give to me. I don’t want them to have enough shares to take over the company so how do I know what to give them.
Drayton
One of the major problems for startups that do business with other businesses or agencies is cash flow. Commercial and government customers normally take anywhere from 30 to 90 days to pay. Meanwhile your company has current expenses you cannot meet, or maybe a new order you cannot afford to fill because you don’t have the cash. In many of these cases you can sell your receivables (factor) for cash right away to help you survive and grow your business. Be sure to seek the services of a qualified factor specialist (cash flow consultant) who can help you find willing buyers for your receivables from dependable but slowly paying customers for a reasonale discount rate. This is not a loan, and your company does not have to be credit worthy to have this service.
Potential lenders and investors want to be sure that the “dollars and cents” of the deal make sense, and that’s why realistic projections are important. Most entrepreneurs underestimate the amount of money needed for start-up.