Small business owners and startup entrepreneurs typically rely on bank loans or borrow from trusted family and friends when In need of financing. Besides these traditional methods there are other viable options to secure funds for financing your startup. Here are the top alternative funding sources you can explore.Small Business Innovation Research Grants (SBIR) and Small Business Technology Transfer Grants (SBTT Government Grants)
Some federal agencies provide substantial funding to small businesses that show great potential and demonstrate innovative ideas in line with the agencies’ missions. They provide Phase 1 grants, which support a startup’s market research in the early stages, and Phase 2 grants, which provide a large amount of money to aspiring business owners with well-developed business plans If you’re confident that you have an amazing startup idea, you should definitely apply for these grants.
Royalty lending grants financing In exchange for future profit. Loans are repaid based on company performance instead of a fixed payment loan, making royalty lending an ideal financing method for companies with unpredictable or Irregular revenue streams An advantage of this feuding source Is the lack of equity share, which means you can keep 100 percent of your company.
However, the loan will be tied to your business performance, which means that repayment can be very expensive once your company flourishes, So, success is a double-edged sword in a way. You can mitigate this inevitable effect by making sure your business provides you a higher potential return than the amount you pay to your investor.
Generally, angel investors are high-net-worth individuals who help finance startups in re-Urn for an equity ownership stake. Compared to venture capitalists angel Investors usually are more considerate with small entrepreneurs and they don’t expect Immediate returns. Angel Investing is a good funding option, as you don’t have to repay the money invested in your firm. However, be aware that angel investors may claim a substantial take in the running of your business.
Peer-to-Peer Finding This Is a relatively new, nontraditional fund sourcing venue that enables Individuals to provide loans to small businesses. It has become increasingly popular in various countries across the globe. Compared to crowdfunding in which lenders allow borrowers to repay them through goods and services, P2P lenders participate for a return on their money.
Credit cards are a viable financial source to supplement your startup funds as they’re relatively easy and convenient to access. The National Small Business Association has revealed in its yearly reports that many small firms use credit cards, along with bank loans, credit union loans, and private loans, for financing. If you decide to use credit cards to finance your business, always make prompt repayments to build a solid credit history for future loans. Additionally, be aware that some credit card companies offer attractive initial Interest rates that rapidly Increase after the Introductory period. Thus, make sore to secure a card with a consistently low-interest rate, and check out review sites to compare different credit card providers.
Now that you have Ideas on where to tap new funding sources, it’s time to explore further and make an Informed decision. While obtaining sufficient funding for your startup can be challenging, it sometimes helps to venture into less trodden avenues to discover options that could very well fund your company and keep your business operating, Make sire to do your research and put everything down In writing upon reaching an agreement with an Investor or lender.