Nothing is more frustrating than knowing you have a billion-dollar idea—but not a penny to put it into action. You might have stumbled across the next great thing, but unless you have startup capital, nobody else is ever going to know it (or buy it).
Your first thought might be to try and secure a traditional bank loan or a loan through the Small Business Administration (SBA). But these are competitive programs and they are difficult to qualify for. That may leave you having to search for creative solutions to finance your startup.
What can you do? Here are 10 ideas which may help you to find the money you need to lay the foundations for your business venture.
1. Turn to online lending services.
There are many opportunities nowadays to apply for online loans. This is a much faster process than waiting for a bank or the SBA to approve a loan. You can fill out an application and submit it within an hour, and you will usually hear back within days whether you are approved or not.
2. Close pay gaps.
Maybe you already have some money and have actually started selling your products or services—but you are having cash flow problems because your customers are taking too long to pay you. There are now services for invoice advancing. These companies will front you the money you are owed while you wait for your customers to pay up. After your customers pay you, you simply pay back the money you were loaned.
3. Try pre-sales.
If you already have a product under development—or are certain you can deliver if you just get the capital—you can try out pre-sales. With pre-sales, you offer your products to customers in advance. They pay you the money weeks, months, or even years before you have the product ready.
This is a great way to raise capital in advance, and also helps to gauge market demand and get to know your customers and their needs. Make sure you offer incentives; most people are not going to buy a product on pre-sale unless there is a special advantage to doing so.
4. Borrow from family or friends.
Borrowing money from people you know may be a painful prospect—it is never fun to be in anyone’s debt—but it is often the best option if it is available to you. You may be able to enjoy a low- or no-interest loan, and you are dealing with someone who knows you and trusts you (and vice versa).
If you go with this choice, make sure that you communicate openly with your lender. It is a smart idea to draft up some form of agreement so that you are both on the same page and have clear expectations of one another.
5. Get a personal loan.
Don’t qualify for a business loan? Sometimes the best option is simply to get a personal loan instead. Companies like SoFi Loans offer excellent low-interest loans with no origination fees. Be sure to do your research and compare personal loan interest rates before you settle on a loan offer.
6. Pull money from a side business.
Do you by chance have another business already that is generating a profit? Rather than abandon that business for your new one, you could try running both alongside each other for a while. You can take the money from the profitable business and funnel it into the startup.
Alternately, if you have a day job, you can try rearranging your finances so that you can save money from that. A lot of entrepreneurs make the mistake of quitting their day jobs way too soon.
7. Get a home equity loan.
This is a loan where you pull equity out of your house; it is only an option if you already own significant equity. It is generally a flexible, low-cost choice for getting some extra money when you need it, but it does mean that you are putting your home at risk. If your business venture fails, you may find yourself facing foreclosure. So be careful with this one.
8. Rent out any extra space you might have.
Happen to have some extra space in your home or apartment? You can always try renting it out. You can take on full-time tenants, or you can list your space on a website like Airbnb for vacationers. Remember, the space you own is a commodity—and it is one that can pay off time and again. So make use of it if you have the opportunity!
9. Enter a contest.
There are a lot of contests run every year for startups. Some of these may be general in nature, while others may be specific to particular industries. Still others may ask you to provide a proposal to solve a specific problem. If you have luck on your side and a smart concept, you very well may be able to win the funding you need.
10. Search for angel investors.
An “angel investor” is a person who invests in a business with a high level of risk. Usually the angel investor will expect an equally high return in exchange—something in the range of 20-25%.
There are many benefits of working with angel investors. They are willing to take on risky situations that a bank may shy away from, and they may offer you a quick decision. On top of that, many of them are former entrepreneurs themselves, which means they may be able to offer you valuable strategic advice in the early stages of growing your company.
Is financing a new business a challenge? It certainly can be, especially if you are in the Millennial generation. The average Millennial makes only around $30,000-$35,000 a year, which doesn’t provide a whole lot in the way of savings for startups. But if you are smart and look for clever alternatives to traditional business loans, you may find that there is a lot more opportunity out there than you imagined.