If you dream of launching your own business and becoming the next shark on Shark Tank, one of the biggest challenges you’ll face is finding capital to bring your idea to life. In fact, the Federal Reserve Bank of New York found that 58 percent of new businesses struggled to find financing to expand.
But don’t despair! That doesn’t mean you have to give up your dream. There are ways to get financing for your business without going into debt.
3 ways entrepreneurs can get financing for their business
When it comes to starting a company, the most common sources of funding are business loans, credit cards, and personal loans. However, if you’re saddled with student loan debt, credit card balances, or medical bills, adding more debt to the mix can be risky.
Thankfully, there are three ways to get financing for your business without borrowing money.
Find an angel investor
An angel investor can feel like a literal angel. An angel investor is a person who is wealthy, usually from growing and building their own business. They lend their money, expertise, and connections to young entrepreneurs to help them get their ideas off the ground.
However, most angel investors want equity in the company in return for the money and help. Although you’ll get the money you need, that means you might have to give up some ownership and control of your business, so it’s important to keep that in mind before moving forward.
To find an angel investor, check out sites like Funded and the Angel Investment Network.
Post on Kickstarter
Thanks to the internet and social media, you don’t need to rely on stuffy banks for funding for your idea. If you have a great concept and an engaging story, you can raise money by posting your business on Kickstarter and sharing it on social media.
Interested people can contribute money to your business idea. Some people will donate as little as $1, while others will donate hundreds or even thousands. With a great idea, you can quickly raise the money you need.
Apply for grants
Another way to get money without going into debt is by researching and applying for as many small business grants as you can. Grants are a form of free money. Unlike business or personal loans, grants never have to be repaid, so they can give you the money you need to grow your business without the risk associated with debt.
You can find a list of available grants on Fundera.
Borrowing money for your business
Although it’s possible to get financing for your startup without borrowing money, not everyone will be able to find an angel investor, successfully crowdfund, or qualify for grants. If that’s the case for you, it’s important to know all of your options so you can strategically decide how to proceed.
For new entrepreneurs, qualifying for a business loan can be difficult if not downright impossible. Most business loan lenders require you to be in operation for at least a year or two before they’ll consider you for a loan.
If you’re not eligible for a business loan, there are two ways to get the capital you need: apply for a personal loan or a business credit card.
Personal loan: Unlike business loans, personal loans are usually unsecured, meaning you don’t have to put up a valuable as collateral. Plus, it’s usually easier to qualify for a personal loan since it’s based on your credit and income, rather than your business’. Depending on your finances, you could qualify for a low-interest personal loan. With lenders like PrimeRates, you can borrow as much as $100,000.
Business credit card: If you need access to funding on an ongoing basis rather than as a one-off, a business credit card might be a better option for you than a business or personal loan. With a card like the Chase Sapphire Preferred® Card, you can earn bonus points and rewards on routine work expenses.
Starting a business
If you want to become an entrepreneur, you have a challenging but exciting road ahead of you. By understanding all of your financing options, you can start a business successfully and be on your way to expanding and earning profits.
If you do need to borrow money to get your business off the ground, make sure you compare offers from multiple companies to get the lowest rates.
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