How to finance your startup without venture capital or angel investors

Venture capitalists and angel investors can be very useful outside sources of capital for established companies, but the value they bring to startups and start-ups is questionable at best. Entrepreneurs should try to finance their businesses through means other than venture capitalists, private equity, and angel investors, unless a large fortune is needed to finance the start-up activities of the business or they choose to work with investors specifically focused on the business. start-up at a very early stage. Here are eight strategies that many entrepreneurs may choose to finance their businesses:

Business credit cards
Many successful businesses, like Under Armour, were financed through credit cards in the early stages of their venture. While credit cards are not necessarily the most ideal source of financing, as they have their drawbacks, if used correctly they can be a very effective source of financing.

How to correctly use a business credit card:
– Effectively manage cash flow by not having to pay for purchases until the end of the billing cycle.
– Use it to pay for initial and fixed start-up costs so you can make your first sale
– Plan ahead how you’ll pay off the balance, then create a backup plan

Things to look for in a business credit card:
– If you’re going to carry a balance, look for low APR
– If you’re going to be running low, look for great cash rewards and introductory promotions

Supply Chain Financing
If you’re selling products, see if your supplier, manufacturer, or distributor could give you a very favorable loan or line of credit. After all, the more successful you are, the more successful they are, and they get it. You’ll be surprised how common this is – many vendors, manufacturers, and distributors have even established procedures for these circumstances. All you have to do is ask.

SBA Microloans
If your business needs less than $35,000 or less, you should consider getting a microloan. A microloan is a small, short-term loan available to small businesses that can be used for working capital or to purchase new inventory, supplies, or machinery. These microloans are available through the SBA, but are distributed by non-profit intermediary community lenders. Although these loans usually require some type of collateral, they also come with very favorable terms and are quick and easy to receive.

Business Plan Contests
There are numerous business plan competitions across the country dedicated to awarding cash prizes to selected entrepreneurs to fund their businesses. While the vast majority of these competitions are geared towards undergraduate and graduate students, there are many local and state competitions open to the public.

Many schools, such as the University of Texas Austin, host business competitions open to all students at accredited universities. Other universities, such as the University of Maryland, hold open competitions just for their students.

If you are not a student, don’t worry. Try Googling business competitions in your state or county, as many local chambers of commerce host competitions to support local businesses. For example, there is the Washington DC Economic Partnership Competition, the Jefferson City Area Chamber of Commerce Competition, the Boston Entrepreneur Center Competition, and the Bizzy Awards.

All of these contests are great because not only do you get a great experience pitching your idea to investors, but you also get a chance to win a substantial amount of free money and receive tons of free press.

subsidies
Grants are essentially free money and are one of the most desirable sources of funding for precisely that reason. Unfortunately, they are also one of the hardest to obtain. Most grants are awarded by state and local governments, and most grants are reserved for businesses that have the potential to provide great service to the community, such as high-tech and medical research companies. Grant hunting can be a very exhausting process with scams around every corner. Start your search at Grants.gov and State Small Business Grants, and be weary of any for-profit or non-governmental entity.

personal savings
While not the most creative source of financing for a start-up, personal savings is still one of the most popular methods. Personal savings allows entrepreneurs to own 100% of the share capital of their company. Relative to other financing methods, personal savings offers very attractive terms, since you keep yourself accountable to no one but yourself, and the cost of capital is simply the opportunity cost of investing that money elsewhere. Personal savings should always be taken into account, since they are one of the most ideal sources of financing.

Friends and family
Even experts don’t agree on the role friends and family should play in financing a start-up. On the one hand, funding from family and friends can be quite simple and straightforward, as there is mutual respect and understanding. Friends and family will be more willing to give you highly favorable terms and may also be less strict in their rules about how the money can be used. However, on the other hand you have the possibility of straining important relationships in your life because of money. If the business starts to fail, there could be unnecessary pressure coming from the very people you need support from. In the end, this source of financing depends on each entrepreneur and depends on a series of specific circumstances.

barter
Many start-ups are very low on cash and credit. Paying for a needed good or service may be impossible, leaving many entrepreneurs in a dead-end situation. One possibility would be to barter for that necessary good or service. First, build a strong relationship with the other party, and then make a proposal. Remember, always consider the other party’s point of view and “what’s in it for them.”

The above are suggestions as ways to finance a new business, but ultimately each situation is unique. Always thoroughly evaluate each possibility and compare it to comparable alternatives.