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Where do most people find the money for their startup? Typically, they patch together their funding from several different sources, not just one. The most common are their own savings, friends and family, and small business loans . All are great options.
But what happens when those great options are not available, for whatever reason? Then the answer is unconventional funding. And these days, fortunately, that too is a possibility. In this scenario, you gotta get creative. Here are some unconventional funding options that could be the key to getting your business off the ground.
1. Enter a business plan competition
Business plan competitions are growing in popularity as cities and organizations look to attract talent, innovative ideas, and the possibility of new businesses and jobs to their respective locales.
These competitions offer substantial cash prizes to entrepreneurs with the best business plans. Search for business plan competitions online or in your area.
2. Tap into crowdfunding
Crowdfunding platforms like Kickstarter or IndieGoGo offer a modern twist on raising capital. Instead of taking out loans or giving away equity, here you pre-sell your product or offer rewards to backers (the crowd) who like and are willing to financially support your project.
Success in crowdfunding depends on how well you market your campaign; getting people excited about your vision is crucial.
3. Seek out grants
Grants are an often overlooked option, but they sure can be a winner (and so can you). Unlike loans, grants literally are free money; they do not require repayment, and they do not require you to give up equity. You can find grant opportunities through government programs, non-profits, and even private enterprise.
Even better: Winning a grant not only provides financial support but also adds credibility to your business, making it easier to attract further investment down the road.
4. Partner with angel investors
Angel investors are individuals who invest their own money in startups, typically in exchange for a piece of the pie (equity). No wonder entrepreneurs refer to them as angels. Angel investors usually look to invest in early-stage companies, and as such, are able to also offer valuable advice and connections in addition to their capital.
To attract an angel, you need a clear and compelling pitch along with a strong business model, a great team of employees , and a solid e-strategy (amazingly, nearly one-third of all small businesses still do not have a website). In short, your business needs to show potential for growth.
5. Consider supplier financing
In some cases, suppliers may be willing to help finance your business by providing products on consignment. Sometimes they even offer direct funding. The key is to show your supplier that helping you succeed will be in their best interest because you will then become a long-term, valuable customer.
6. Explore seller financing
If you're looking to buy an existing business but do not have the funds upfront, seller financing could be a possible solution. In this scenario, the current business owner acts as the lender, allowing you to pay off the purchase price over time.
Ideally, this is a win-win: You acquire a business with manageable payments, and the seller gets a steady income stream. (One caveat, however: Be careful of the business that is unable to be sold in a conventional manner. Something may be amiss.)
Bottom line
When traditional funding sources fall short, creative alternatives like these can provide the capital you need to make your entrepreneurial dream a reality. Explore your options today.
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