In this booming era of the startup, it can be equal parts inspiring and intimidating for anyone who wants to start their own business. Not everyone has a mentor in their back pocket who can help guide their process or even get them on the road to entrepreneurship. If you are considering starting your own business but don't have a clue about how, this article is for you!
Step 1: Get a Loan
Perhaps the most essential ingredient to starting your own business is having the money to do so. While you could try your luck as the next contestant on Dragon's Den, it is more practical to get a loan. With all the options out there it can easily become overwhelming, so we have narrowed it down to the fundamental types of loans to make the best choice for your new business.
Tribal Loans
Tribal loans are the most flexible in that they offer money quickly (often within 24 hours) and can be applied for without stepping foot in a bank. They allow for sums of $100- $1000 to be borrowed and have very minimal eligibility requirements. Be mindful that some loan agencies will require that the loan and fees are withdrawn automatically from your chequing account upon due date which is great in the sense that you don't have to do very much on your end, but can incur additional banking fees if you are not prepared for this withdrawal from your account.
Personal Loan
A personal loan is another option if you have some additional time to spare and are comfortable with a credit check. The maximum available amount can vary depending on your financial institution of choice and eligibility requirements are generally more stringent than tribal loans. The advantage to this type of loan is that you aren't required to demonstrate the revenue of your start up ahead of time.
Line of Credit
A line of credit is more flexible than a credit card and provides better interest rates. Once it has been approved, you don't pay interest until you begin to use the loan and you can perform all typical activities like writing cheques, withdrawing cash and moving the money to various accounts as needed. You can access an application online with your bank or with most credit unions. A line of credit loan ranges between $5K - $500K depending on your credit score, personal income and other outstanding financial obligations like car payments, mortgage, etc.
Step 2: Crowdfunding
Crowdfunding is relatively new concept and an amazing way to earn money if you have a somewhat established network and a business idea that people want to get behind. The advantages to crowdfunding are two-fold in that you can raise an ample amount of money while building awareness of your brand.The up front cost is minimal and you can provide your investors with incentives like gifts or shares in exchange for their support. It gives you the opportunity to be creative and test your idea in a relatively low risk manner. Popular platforms for crowdfunding campaigns are Indiegogo, Kickstarter, and Gofundme which provide seamless, user-friendly experiences. Each of these services operate in slightly different manners so it is important to get familiar with them before choosing. For example where Kickstarter will only grant you funding if you achieve the entirety of your goal, indiegogo will allow you to keep the proceeds if you pay a higher overall service fee (up to 9%) so it's best to do your research.
Step 3: Bootstrapping
Do you hate the idea of borrowing money to start your business? Then bootstrapping may be the answer you're looking for. The act of bootstrapping refers to the ability to use your own resources and keep costs at a minimum when starting up. The advantages are that when your business takes off, it's equity is greater since the assets have not been borrowed. You rely less on others and are in a more appealing position to investors when the time does come to seek outside funding. You can delve deeper into more specifics surrounding the sources of bootstrap funding here. Essentially you are balancing your finances with savvy decisions to make the most out of limited capital while remaining in control. You may be surprised to learn that companies like Mailchimp, the popular email marketing tool, AirBnb, the short-term apartment rental site and Venngage, and online infographics tool are all examples of startups who bootstrapped in the beginning.
Step 4: Apply for grants
Did someone say FREE money? You would be amazed at how many grants are available to those looking to start a small business. Starting with your government is a good first step, research the criteria and mark important deadlines in your calendar so as to be prepared to submit important documents well in advance of those dates. As you can imagine, it is a competitive place to source your funding so you are going to want to comb through your application with a fine tooth comb to ensure you have done a thorough job.
Most grants are organized into various categories of applicants and factors which make it relatively easy to uncover the most suitable options - only apply for the grants that are a 100% a match. For example if you identify with a minority group there are specific grants available or if you're a student or recent grad, there are a number of grants and scholarships aimed specifically at new grads like this one.
Grants are also sometimes made available by large corporations within your chosen industry. Chances are, if you're starting a business that you have researched, some of these larger companies within your field may offer grant options. Make sure to keep an eye out on websites like Charity Village, company websites and even Twitter to see what grants might be available to you for growing your business.