by Susan Paige
Starting a business is incredibly difficult without startup capital.
Even if you’ve got an amazing idea and a flawless business plan, you’ll never get it off the ground without financial backing. Unless you’re independently wealthy, you can just snap your fingers and have that money appear.
Don’t let this be the reason that your business never makes it, though. In this article, we’re going to tell you how to raise money for a business in 2020. It all comes down to planning, research, and building relationships with the right people.
If you’re confident in your business and your own ability to turn it into a success, then you’ve got to find that money. Let us help tell you where to get it.
The hardest road traveled is the one where you finance the entire operation yourself. It’s hard, but also the most preferred because you’ll be able to control everything. If it doesn’t work, however, you’re going to be out a lot of money.
There are countless ways that you can fundraise for your business. Many people take on a second job, tap their personal savings, and sell off their personal assets (bonds, stocks, real estate, heirlooms, etc.) to come up with extra cash.
One of the more popular methods, if you’ve been working for a while, is tapping your own retirement fund. A lot of these are really risky and you should (obviously) be wary of what you could lose. However, many successful entrepreneurs would tell you that you have to be prepared to risk it all to succeed.
Crowdfunding Campaigns Work In 2020
One way to leave at least some of your own money off the table is a crowdfunding campaign. If you’re a good salesperson, make your pitch to your future customers and see if you can’t fundraise the new-old-fashioned way.
It’s a very modern-day solution to a financial problem and you’ll probably have to offer something back to your investors (stocks, perks) to have them buy-in, but it’s a low-risk, high-reward way to find the money that you need.
Get a Small Business Loan
This is still how most small businesses get started in 2020. The small business administration (SBA) states that 75% of companies start with bank loans, credit cards, and lines of credit. The SBA itself offers favorable terms for startup loans.
When you apply for an SBA loan or a loan from a financial institution, they’ll have some requirements that may hold you back. Being a business for 2 years is one, having strong revenue numbers is another, and having decent credit is a third.
Some entrepreneurs check all of these boxes, while others check none. That doesn’t mean that you can’t get a loan at all, but it might keep you from getting a bank loan.
Angels & Demons
Angel investors are people that have money to burn and look to do it with young entrepreneurs with good business ideas. Of course, when we say “money to burn”, we actually mean “money to invest wisely”, so you’ll need to have a really strong business plan and pitch in place to appeal to one of these angels.
If you’ve ever seen the TV shows Shark Tank or Dragon’s Den, then you’ve basically seen a suped-up version of how this works. You can find angel investors at sites like Go4Funding and MicroVentures, but you’ll have to set up a meeting and wow them yourself.
One of the really good aspects of angel investors is that they can help guide you through the business world. You have to be careful of the terms of your loan, however. These savvy business people aren’t going to be reckless with their money.
The demons, in this case, are venture capitalists (VC’s). These are investor groups that are less likely to invest in non-established businesses, but it never hurts to prepare a presentation and try your luck.
If you get funding from a VC, they may want to have more say in how you run the business. They have standards that they need to achieve financially, so your product will need to be a real moneymaker.
Network to Find an Investor
Sometimes good old fashioned networking can lead you straight to the perfect investor or partner. When going to networking events, you have to be outgoing and personable enough to grab people’s attention.
Make cards, be professional, and have a one-minute sales pitch ready to throw out at the right people, when you find them. We won’t say that it’s likely that you’ll find an investor at a networking event, but stranger things have happened.
Start Smaller, Then Expand
When you’re starting out in your industry, it’s way more affordable to start small. Even some of the largest corporations in the world right now had pretty humble beginnings. Amazon was an online book shop, now Jeff Bezos is the richest man in the world.
The point is, you can have a grandiose goal in mind like running the largest cross-country logistics company in America, but you need to start out by solving a smaller problem in the trucking industry first. It’s a cheaper startup and more achievable to start as a local courier and slowly build capital and knowhow.
When you’re ready to make a big leap, you’ll have the experience and achievements to point to when looking for investors and loans. When you’ve got a proven track record, people are more likely to give you money, simply put.
Learning How to Raise Money For a Business Is Part of Your Plan
When you’re crafting your initial business plan, one of the first problems that you should try to solve is tackling how to raise money for a business. Try out a few of these methods and see what works for you. Every business idea and every entrepreneur are a little bit different, so no two methods are exactly the same.
If you found this post helpful, come back and visit us again for more on business, finance, and getting out of debt.