What Are Your Startup Funding Options?

17 September 2015
 Categories: , Blog


If you have a brilliant idea for a product or service, but lack the financial backing to launch your own startup company, you may be wondering about your next steps. Should you continue working at your "day job" to save up funds to help get a toehold into your preferred industry? Or should you resign and devote your time to actively seeking investors? Read on to learn more about the most cost-effective ways to fund your startup. 

Angel investor

An "angel investor" is a type of private equity or venture capital firm (or even an individual) that provides an initial cash investment in exchange for a percentage of future profits. This type of funding is very popular among startups due to the ability to circumvent many onerous banking and lending regulations by trading on the private market. 

To find an angel investor, you'll need to do some pavement-pounding. First, you'll want to consider your target investor -- who would potentially be interested in funding your product or service and making it more widely available? For example, if you've created an innovative new way to quickly prepare labor-intensive foods (like a pineapple slicer or pine-nut extractor), you may want to seek out local restaurateurs to invest in your technology. 

You'll then need to develop a business plan that will show your angel investor exactly how you plan to double or triple his or her investment within a short period of time. Angel investors are interested in funding different or unique ideas but also want to be sure that they'll be able to receive a hefty return on the original investment.


Another good option -- particularly for a product or service designed to appeal to a larger demographic -- is the use of crowdfunding. By setting a target investment amount and encouraging your friends, colleagues, and other acquaintances to share the link to your funding site far and wide, you'll find that you'll be able to solicit donations from individuals across the globe. The more potential investors your story reaches, the more funds you'll be able to collect, even if each donor only contributes a few dollars. 

An advantage to crowdfunding is that it generally operates as a gift, rather than a loan -- while you'll be required to pay taxes on the monies received, you'll be able to use them to get your business off the ground rather than spending time worrying about repayment. 

Small business loans

If your product or idea is one that could be fashioned into a profitable retail or service-oriented business, it's likely you'll be able to qualify for more traditional financing, perhaps backed by the Small Business Association or a similar state or local agency that helps guarantee financing for promising businesses. 

Your odds of approval should rise significantly if your business plans to target or employ a traditionally under-represented group, like women, minorities, or the handicapped. You may want to speak with a local banker to determine whether this is a viable option for your situation.