Have a great business idea? What are the different ways to finance your business? These are some of the questions that you will certainly ask yourself once you are building your own venture.
There are actually a wide variety of ways to fund your business from initial launch to scaling your company through to an IPO. Speak with a fundraising consultant and determine the best method for you and your idea at each stage.
1. Personal Savings
If you’ve got the cash and you are thinking about ways to finance your business, using personal savings to begin your venture or fill in the gaps in the early days can have many advantages. It means less outside pressure and needs to please investors and take short cuts, versus doing what is best for the business for the long run.
You may also get far better returns on your savings being put into a fast-growth startup than just sitting in the bank too. Eventually, you can leverage other forms of funding to bring in more stakeholders.
2. Personal Credit
Using personal credit and credit cards to fund a startup is probably more common than you might think from the different ways to finance your business. I’ve met with some of the most successful founders who initially funded their ventures with personal credit cards. Some going as far as $40,000 or $200,000 in debt to get the venture going.
Reggie Aggarwal is a clear example of this. He used more than 20 credit cards to obtain $400,000. That was a huge risk for him. However, his company Cvent had a positive outcome as it was recently acquired for $1.6 billion.
It may sound crazy and is definitely risky, but it has definitely worked for some. The key here is to only charge what you need at the time to keep interest payments down, to look for introductory and balance transfer deals, and to line up all the credit you may need (and more) before you start using it.
Be sure you are canceling out that debt as quickly as possible once the money is coming in too.
3. Business Credit & Loans
Traditional business loans from banks are still elusive. Most startups won’t find they can get a loan for a new business by walking into a local main street bank.
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