Funding: Securing Capital for Your Project
Now that you have your idea and implementation process in place, it’s time to get your project funded. Financing the project ensures that the necessary amount of money is available. To know how much money is needed, you must calculate the costs, benefits, and investments involved. As an entrepreneur, finding creative ways to fund your business or project is essential. Here are a few funding options you could use to fund your project.
Bootstrapping
Bootstrapping is a method of financing your business using your own funds, such as personal savings, personal loans, SBA-backed loans, credit lines, or credit cards. When you bootstrap, you don’t give up any ownership or equity in your company, unlike taking angel investment or venture capital. This approach also necessitates generating revenue quickly to sustain your business.
The primary benefit of bootstrapping is that you retain complete control and ownership over your business. Often, this means working on your idea on the side while maintaining a regular job, also known as moonlighting. Bootstrapping can be a challenging but rewarding way to maintain independence and control.
Crowdfunding
Crowdfunding involves asking a large number of people to fund your business through small donations, usually in exchange for a small gift like branded merchandise rather than a financial return. Most crowdfunding platforms are low-risk because they don’t require business owners to repay the money to donors. However, a crowdfunding campaign can be time-intensive to put together, so it’s important to ensure it’s a good fit for your business.
Platforms like Kickstarter, Indiegogo, and GoFundMe allow businesses to present their ideas to a broad audience and solicit contributions. Crowdfunding not only helps raise capital but also serves as a marketing tool, building a community of supporters and generating buzz around your product or service.
Small Business Administration (SBA) Loans
In the U.S., the SBA offers various loan programs through participating banks across the country, designed specifically for small businesses. These programs are typically less risky and more accessible. The SBA itself doesn’t lend the money; instead, you’ll need to establish a relationship with a loan officer at your local bank, credit union, or nonprofit financial intermediary to access these programs.
SBA loans can be a valuable resource for small businesses, providing favorable terms and support for businesses that might not qualify for traditional bank loans.
Bank Loans
A bank loan provides medium or long-term finance. The bank sets the fixed period over which the loan is provided (e.g., 3, 5, or 10 years), the interest rate, and the timing and amount of repayments. It’s often wise to work with a credit union or local bank to have direct interaction with someone on your loan application.
In addition to your business plan, the bank will require security, or collateral, for the loan. For startups, this often comes in the form of personal guarantees provided by the entrepreneur.
Insurance Policies
You can also take loans against your life insurance policy. This can be done through your insurance policy holder against the value of your life policy. Three types of life insurance policies you can use are whole life insurance, universal life policy, or a variable life policy.
The benefits of a life insurance loan for an entrepreneur include no credit or background checks affecting your credit history, flexible payment schedules since monthly repayments aren’t required, and lower interest rates. This is an excellent way to utilize funds as you grow your business.
Conclusion
Now it’s time to take your business from Idea, to Implementation, to Funding. By exploring these various funding options, you can secure the capital necessary to drive your project forward. Download our 10-minute investor-grade business audit here to get started on your path to success.