How to Get Funding For a Startup: Five Common Methods

At last count, the US plays host to around 32.5 million small businesses. While that might seem like more competition than anyone can handle, people start new businesses every day.

Sometimes it's prompted by changes in the marketplace, like a surge in e-commerce. Other times, the entrepreneurial spirit drives you.

Yet, all startups face common problems. One of the most common problems is, "How to get capital?"

If you're wondering how to get funding for a startup, keep reading. We'll cover five of the most common methods for bankrolling your startup idea.

1. Self-Funding

In the earliest days of your startup adventure, you'll almost always do it with self-funding or the bootstrapping method. In this approach, you don't rely on outside funding at all. Instead, you bankroll the whole project out of your own pocket.

You might use savings, borrow from a retirement account, or even lean on credit cards for a while.

2. Business Loans

Another common approach to the funding problem is a small business loan. You can potentially get these kinds of loans directly from your own bank. You might also work through a bank that provides SBA loans.

While this may seem like the most reasonable solution, it's not always the most workable. Banks are leery about small business loans in general, particularly for startups in new industries. SBA loans can prove easier to get, but it's still an uphill battle.

3. Personal Network

Many would-be entrepreneurs forgo the bank rejection and appeal directly to the people who know them best. They go to their personal network of family, friends, and acquaintances.

Securing funding from your personal network is often easier than finding other external funding sources. Your network might ask to see your business plan, but what they're really investing in is you.

4. MCA

If your startup has been up and running for a while, you're probably making some sales. If that's the case, it opens up some other options for you.

For example, you can look into getting a merchant cash advance. In essence, the lender gives you a cash lump sum and deducts a percentage of your future credit/debit card sales until you pay off the balance.

5. Angel Investors/Venture Capital

Getting money from an angel investor or venture capital firm sounds like a great deal. Yet, it's far from a certain option.

While angel investors can prove more open than venture capital firms, it's still a long shot. Both groups must see the potential for substantial future growth.

How to Get Funding for a Startup? Explore Your Options

The solution to the problem of how to get funding for a startup is that you should explore your options. Don't rush into getting a loan and don't immediately assume you must bootstrap.

Talk with people in your network about whether they have any interest in investing. Try to open a dialogue with angel investors and venture capitalists. See what's out there, and then make your choice.

Clarendon Funding Solutions specializes in business funding. For more information about our services, contact Clarendon today.