How to finance your startup

Every startup needs to have some capital to thrive. Finding funds in most economic climates is quite tricky, whether you are looking for capital to expand or startup funds. There are various financing options that you should consider, including:

Get a bank loan

Although lending standards have gotten a lot stricter, you can get small business loans from banks such as Bank of America. When applying for a loan, the process usually takes about 3 months. Therefore, you need to be patient.

When approaching a lender, you need to be meticulous in filling out your loans. Moreover, you also need to provide plenty of documentation as well as backups. You should also be prepared to answer a series of questions about your financial situation and business.

Tap into the 401 (k)

If you are thinking about starting your own business, the funds in your 401 (k) can be very tempting. If you follow the right steps, you can tap into these funds without being penalized. Although the steps seem easy, they are complex from a legal perspective.

You will need the help of an experienced individual to set up a C Corporation along with the right retirement plan into which you can roll your assets. Just remember that you are investing your retirement funds. If your business fails, you will lose your nest egg.

Crowdfunding

Crowdfunding sites provide startups with a fun and creative way to raise funds. You need to set a goal of how much money you wish to raise in a specific time. Your family and friends can then visit the site and pledge money.

Keep in mind that this funding option is not for the long-term. Instead, it is meant to facilitate the solicitation of money for single, one-off ideas.

Pledge your future earnings

Are you young, ambitious, and willing to bet on your future earnings? You can pledge your future earnings in exchange for venture funding. However, you should keep in mind that the enforceability and legality of such personal contracts has not been established.

Get an angel investor

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When pitching for an angel investor, you need to be succinct, have an exit strategy, and avoid jargon. However, the economic turmoil of the past several years has made this quite complicated. If you are hoping to win over an angel investor, here are some tips:

Do not be a fad-flower – if you started your company because you are passionate about your idea, you need to prove it to the investor. Most angels can tell the difference between real passion and a desire for money. If you only are only after a get-rich-quick scheme, the investor will know because he does it for a living.

Add experience – seeing older people on your management team will ease some investor’s fears. Older people tend to have more experience and can deal with tough financial situations. Even if you add an unpaid adviser to your team, your credibility could increase by a lot.

Keep in touch – although an investor might not be interested in your business right away, you should give it time, especially if you do not have the record of accomplishment of a good entrepreneur. To fight that, you should come up with a plan that keeps prospective investors in the loop on big developments.

Know your stuff – you need to perform competitive analysis, market assessments, and sales plans if you want an angel investor to take an interest in you. Even your startup should show that it has some expert knowledge of the market that it plans to enter and the discipline to stick with its game plan.

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