The Best Ways to fund your online start-up

It has been said time and time again that you cannot be rich by just being an employee. Many have excellent business ideas but can’t start a business because of lack of capital. It used to be so difficult to get funding because entrepreneurs didn’t know how else to get the funds aside from getting loans from a bank. But with globalization, the whole world has become our community and expanded our reach. And because of this, various ways to get funding for a business opened, thus, many people have heeded the call of entrepreneurship.

Crowdfunding

The concept of crowdfunding has been around for ages, tracing its roots back to the 19th century. During this time, books were crowdfunded in order to be published. Authors and publishers went out to gather a list of interested subscribers to a book. Though no money was taken to publish a book, the number of subscribers was enough to proceed with the publication of a book. Online crowdfunding came to be in the 1990s, in the arts and music. The first online crowdfunding instance was in 1997, for a concert by Marillion. This British rock band was able to raise USD 60,000 through a fan-based fundraising campaign. Then in 2001, the American website ArtistShare was the first crowdfunding site to be launched. Other sites followed suit such as Kiva in 2005, IndieGoGo in 2005, Kickstarter in 2009, and GoFundMe in 2010 to name a few.

Angel investors

Angel investors, also known as business angels, angel funders, private investors, or seed investors, are rich individuals who give money to start a business. William Wetzel, a University of New Hampshire professor started using the term “angel” when he wrote a study in 1978 about how businessmen raised seed money in the US. Angel investors do not just give money to startups. They also provide advice or mentoring to the business, make use of their network to generate more interest in the business, or to stay updated in developments or innovations. There are several groups and associations of angel investors throughout the world.

Taking a loan

Aside from traditional bank loans, governments also offer grants to startups. In the US, the US Small Business Administration (SBA) 504 Loan guarantees a part of the cost of procuring fixed assets for a business. It requires that 60% of the funding needed comes from the business owner and a traditional lender. The loan covers or guarantees the remaining 40% of the funding required. The funding does not come from the SBA loan itself but the government coordinates with their affiliate financial institutions who in turn provide the funding. Since the requirements of securing an SBA loan is exhaustive and strict, traditional lenders, e.g. banks, are more lenient in approving loans to startups. Others also go for merchant cash advances

To get external funding for your startup, make sure you have a solid business plan and a marketable product or service, aside from your commitment and passion in your business. You have to clearly present and communicate where you want to go with your business and how you aim to make it grow.