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33 Ways to Fund Your Startup Business

No matter what the economic situation, someone somewhere, eyes bright with potential, is looking to start a new business. Funds are often the biggest hurdle to what could otherwise be a lucrative opportunity. Here are some ways - traditional and/ or creative - to raise money for your startup business.


33 Ways to Raise Startup Money


1. Personal savings . There's nothing like having your own money saved, to put into your startup. You have the satisfaction of having saved it on your own, and the knowledge that you don't owe anyone.


Risk : It's your money, and if you're not successful, the money is gone, and with it the opportunity to do anything else with it later.


2. Partner savings . Having a partner helps spread out not only the business management but the financial burden. A good partnership is also synergetic, bringing more success than running a business alone.


Risk : A fed up partner who wants out; arguments; irresponsible partners who leave you with all the debt; broken friendships.


3. Sell your stuff . Sell anything you haven't used in a year or longer. The same goes for leased items.


Risk : Regrets, or worse: going out and spending to replace the item(s) you sold.


4. Windfalls . Invest any tax refunds, gifts, lottery winnings into your business.


Risk : Getting hooked on lotteries and gambling to "fund" your dream business.


5. Barter and resell . Consider offering product or services that you can barter in return for something that you can sell for a profit. A very extreme execution of the bartering principle is Kyle MacDonald's One Red Paperclip experiment. He started with a red paper clip, and through a series of swap/ barter transactions, he ended up with a house within a year, and is now trying to trade it, potentially for cash.


Risk : One Red Paperclip is a novel approach, though unless you have something well-thought out and as interesting (and you let your personality through), it's hard to do a successful followup act. You might find enough people to support you, but you'll need to find them and hopefully they'll know nothing about One Red Paperclip.


6. Retirement savings plan . Dip into your retirement savings, especially if there's a government incentive (i.e., qualified tax break). Or take advantage of home ownership programs from retirement plan funds, and use your original rental funds towards your business.


Risk : If you can't pay back your savings plan, there may be a penalty as well as having to declare the funds as earnings.


7. Credit cards . It might be easier to use your lines of credit (which you'll have if you have a good credit score).


Risk : Credit card interest rates are almost always higher than that of a bank loan or blood money. (The latter sometimes has no interest rate, but you pay for it in other ways, as indicated above.)


8. Credit card arbitrage . This is an extension of the credit card approach, and uses the "0% balance transfer " options that were so commonplace a few years ago. With the current credit crunch, this may not even be an option.


Risk : This is a dangerous way to run a business, but the very disciplined entrepreneur with "sure" income can pull it off. Prior to the current economic crisis, type of card choice would have been the 0% cards. Even before such cards existed, some entrepreneurs have successfully built businesses on multiple credit cards. Others have gone into heavy debt and gone bankrupt. Having a business plan that has been carefully scrutizined can make the difference.


9. Blood money . Borrow from family, friends, colleagues, or employees . An alternative to this is to have one of the aforementioned cosign a bank loan for you.


Risk : Meddling lenders, constantly reminding you of what they gave you; ruined friendships.


10. Get a bank loan . If you have a solid business plan and the lender agrees, this can often be the cheapest (interest rate-wise) loan sources available.


Risk : Besides the fact that it's often hard for a startup to qualify - since there's little evidence you'll be profitable - if you do get a loan, it can be like a ticking time bomb if your business isn't doing well.


11. Home equity . If you have equity in your real estate holdings, some lenders will accept that as collateral against a business loan. Alternately, you could refinance your home, taking a mortgage with a lower monthly payment, thus freeing up some funds for business.


Risk : You put your home at risk, and potentially your family and marriage, if that applies to you. With refinancing, you end up paying far more interest over the lifetime of your mortgage.


12. Cash out your life insurance policy . This has been a common way for entrepreneurs to fund their startups.


Risk : The payout is usually a lot less than the policy is worth. It's not recommended if you have a history of illness because you can't afford to get sick, injured, or worse.


13. Grants . There are often a variety of government grant programs for specific types of startup businesses. for more information, search online on government websites. Unless they're reputable, don't pay money to sites that tell you they'll give you a big list of where you can get grant money.


Risk : While grants are rarely required to be paid back, accountability is higher, and you might have to work within a difficult deadline, to show your progress. If you do not achieve the progress you indicated in your proposal, there may be some sort of penalty.


14. Donations via social media . For example, the Tweetsgiving  drive via Twitter pulled in over US$10K in just 48 hours, simply from donations of $5 or $10 dollars. This sort of approach works thanks to online payment processing services such as PayPal .


Risk : Generally only effective for charity organizations, and not necessarily one that is yet to be established. Requires a large group of followers, or enough "power" accounts in your Six Degrees of Separation chain.


15. Microloans . Kiva , Prosper , etc. These may be relatively small, but if combined with a technique such as bootstrapping (discussed below), might get you through the early stages of your business. If you have a good plan in a potentially lucrative niche, microloans might be easier to get than a bank loan or investment funds.


Risk : Everyone knows your business. Or at least more people than you might otherwise want, from the website in question. What's more, the U.S. government has put many microloan sites (e.g., Prosper) on notice to file with the SEC (Securities and Exchange Commission). This might or might not raise transaction fees, or simply limit the pool of funds since they're currently not accepting new lender registrations.


16. Startup incubator . Business incubators such as YCombinator exist in various industries, but more likely for tech niches than anything else. They tend to be more accepting of a promising idea and a smart entrepreneur. This type of funding is sometimes known as "seed financing."


Risk : Their funding offers are typically smaller than from angel investors or VCs. Incubators are sometimes found at university campuses, funded by industry, but less visible to anyone outside of the community. They might fund very fewer projects and with smaller budgets.


17. Investor capital . Get angel investments or venture capital. Convert blood money lenders into investors or silent partners. Or find angel investors, who tend to give smaller loans than VCs (Venture Capitalists). Venture capital is less of an option for most  startups, but might come at a later stage. Note that at a later stage, your customers and suppliers could very well be investors.


Risk : Not enough money, or difficult repayment terms. Many investors expect to sell the company at some point in the future and cashout. That means offering an IPO, which locks your payout thanks to SEC rules. You also have to be incredibly careful about not falling into insider trading issues.


18. Leasing . Leasing is not so much a way to raise funds as save them, since equipment leasing reduces your initial startup costs over buying outright.


Risk : Leasing means having to pay interest, sometimes at high rates. If you run into any cash crunch, it could mean losing equipment that you need to operate, or having to come up with funds to make lease payments.


19. Factoring companies . Factoring companies buy your pending invoices (accounts receivable) and give you cash, minus a transaction fee.


Risk : You get paid sooner but you lose profit that might be crucial in the future.


20. Check rediscounting . This is similar to factoring. However, check rediscounters take a postdated check you have written and pay you now, minus a fee.


Risk : This is more risky than factoring, since you're make an assumption that you'll have funds in time. If you don't, and if you don't have sufficient bank overdraft protection, then this could spell serious financial problems.


21. Private offering . Turn your blood money lenders into part owners, so that they have an emotionally vested stake in seeing your business succeed.


Risk : You might lose partial control of the business, and if you have to have meetings to make simple decisions, that could hinder your ability to work effectively.


22. Public offering . A public offering widens your potential for selling shares and thus getting operating capital when you need it.


Risk : Shareholders expect something in return, whether it's dividend payouts or increase in stock value. There's also the issue of now being bound by all the SEC (Securities and Exchange Commission) rules.


23. Consignment . This isn't so much as a fund source as it is a source of product to earn revenue and then pay "suppliers" after their products sell. Small boutique shops often take this approach, thereby reducing their operating costs to rent, electricity, phone and few other items. Stock costs drop potentially to nil.


Risk : If you're not disciplined enough to sell the product, product takes up space and suppliers get upset.


24. Employer intrapreneurship programs . Companies sometimes have programs that allow qualified employees time, resources and even funding to explore a  business idea or technology.


Risk : You may have to live up to certain milestones or expectations, or will likely have to turn over any inventions/ technology to the company. That is, even if you get credit, you might not be able to profit from your effort.


25. Entrepreneurship programs . This is similar to intrapreneurship programs but is not limited to employees of a company or organization.


Risk : Once again, you may have to live up to certain milestones or give up some control in your startup.


26. Online ad revenue . This is an option that has only become available in the last few years. If you have the skills to build, promote and monetize a web site - which you can start for practically nothing - then you might profit either by selling it or using advertising or other revenue (premium content sales, subscription fees, consulting, etc.) to fund your startup.


Risk : The risks are multifold. First, despite that some website owners earn substantial income from just advertising, that source can drop unexpectedly due to changes in search engine ranking systems. You also have to put in considerable early effort to build a website to a monetizable state. This means less time for you, which might delay the launch of your startup.


27. Freelancing or contracting . You may not be able to hold down a regular job while also running a startup, but part-time freelancing or contract might be an option for producing extra income.


Risk : Time spent freelancing or contracting is time that you cannot spend on your startup.


28. Auctioning your name . If you don't like your personal name or are otherwise willing to change it to a company or brand name, you might be able cash in for many thousands of dollars.


Risk : Usually the potential of being ridiculed by friends is enough, but part of the deal might mean having to change all your official documents. There could be negative publicity as well.


29. Selling your body . No, not like that. Sell advertising space on your body . Options include wearing signboards, t-shirts with company logos, or temporary or permanent tattoos. A less drastic option is to sell ad space on your car.


Risk : Do you really want to be associated with someone else's brand while trying to build your own? If it's a permanent tattoo, don't be surprised if you have regrets in the future.


30. Awards/ competitions . Universities and companies occasionally have business/ entrepreneurial competitions.


Risk : The payoff may not be large enough for the effort you put in to win. Some contests may require you to reveal more details than you're comfortable with, or possibly have to give up ownership - depend on sponsor requirements.


31. Dividends . If you have mutual funds or stocks in your investment portfolio that pay out regular dividends, this could be a potential source of startup funds. This way, you do not have to cash in your portfolio, and it can continue to earn for you.


Risk : Depending on tax laws in your country, some types of dividends might be taxable at source, if you are not reinvesting them. So your actual "take," minus any brokerage fees might leave you with very little.


32. Real estate . Sure, the market is a mess right now, but if you have the down payment and will have enough cash flow, consider acquiring some real estate because of all the deals available. Move in to part of the property and rent out a portion. Not only do you build equity, you might even have a positive cash flow to put towards your business.


Risk : While a renter's mortgage is often offered at a lower interest rate, you're reliant on tenants for part of your payments. If your tenant moves, there's the time and cost of finding a new one.


33. Bootstrap . When none of the other options are viable or available, bootstrap your wayto success . Put all or most of the profits of your business right back into to it until it becomes self-sustaining.


Risk : Bootstrapping can feel like a thankless activity for quite some time. It can break the spirit of some people.