5 Ways Startups Can Get Funding Without a Bank Loan
You have a great idea for a new company and have written a detailed business plan to launch and manage the business. You’re ready to get started but haven’t been able to get approved for a bank loan to fund your venture. Many startups have tackled the same initial problem and turned to alternative financing sources as a solution. Here are five ways you can obtain the funds without a bank loan.
1. Family and Friends
Many new entrepreneurs look to family members and friends as their initial source of capital. If you borrow money this way, draw up loan documents and commit to a repayment schedule with interest. Your other option is to make them shareholders and investors in your business. This is a great choice if they have successful business experience and valuable advice to share with you.
Veterans, women, and minorities can apply for a grant from the Small Business Administration. Check with your local Chamber of Commerce to see what other grant options are available in your area. Make sure to read all the fine print to determine if there are any stipulations with the grant so you know what is expected of your company once you accept the funds.
3. Fintech Loan
Over the past few years, online financial companies, commonly called Fintech, have emerged to offer digital financial services directly to consumers. The goal of these companies is to provide better and faster service to customers, including those with little or bad credit. They look at your education, employment history, business plan, and credit score to determine your creditworthiness. Because the process is done digitally, you receive your approval and funds quicker, sometimes in just one day.
Often known as angel or venture capital investors, this method involves pitching your business plan to wealthy individuals who invest in your company for a return on future profits. These investors work alone or form an investment group to provide funds to startups. They generally look for businesses with huge growth potential in a business sector they are familiar with.
Some entrepreneurs self-fund their new companies by launching them as a side hustle while working another job that provides all their living expenses. Although this method takes longer, it is safer than running up your credit cards or emptying your retirement accounts.
If you’ve been turned down for a bank loan, try one of these alternative options to fund your new business venture.