8 Creative Ways to Fund Your Startup
8 Creative Ways to Fund Your Startup ~ I founded The Visionetics Institute to be a comprehensive mechanism with the capacity to assist people in converting their visions into reality. A significant part of reaching the heights of an expansive vision is achieved in your mind. I often tell my clients that having the best strategy in the world will have little benefit if your psychology does not align itself with your passion. Often, people know that there is something better out there for them, but they are still holding on to limiting beliefs that are associated with a paradigm that robs them of the confidence necessary to take the required actions to achieve what they so desperately desire.
It is these limiting beliefs that keep most people in a holding pattern wishing that things would change in their favor. The truth is that you cannot change the results you are getting without taking the necessary actions to change the cause. One of the seven universal laws that govern everything in this world is the Law of Cause and Effect, which states:
“Every cause has its effect; every effect has its cause.” In accordance with this Law, every effect you see in your outside or physical world has a very specific cause which has its origin in your inner or mental world. This is the essence of thought power. Every one of your thoughts, words or actions sets a specific effect in motion which will come to materialize over time. To become the master of your destiny, you must master your mind for everything in your reality is a mental creation. Know that there is nothing like chance or luck. They are simply terms used by humanity in ignorance of this Law.”
While your success in life — whether in business, marriage, finance, social impact, etc. — will require that you have a cognizance of certain strategies and mechanisms, your thoughts remain the seeds of your destiny and that is where you must begin.
I have written and published 19 books, and I am currently writing my 20th. I have launched and brought to profitability 46 companies, and I have been actively involved in the success of countless others. I have lectured before a wide array of audiences on multitudinous topics ranging from success in business to epigenetics and its impact on the biological vulnerability to diseases like cancer, diabetes and heart disease — as well as its impact on the intergenerational transmission of trauma, as well as countless other accomplishments that will go unnamed here. So, does all of this mean that I have had advantages and opportunities that those who have not experienced this type of success have not had access to? Absolutely not. Opportunities and advantages are created through the processes of toil that is birthed from a belief that what you seek is possible. The only difference between me and someone who is struggling to achieve success is our mentality.
Fortunately, it is possible to rid the mind of limiting beliefs and to adopt a mindset that is conducive to massive success at any level. The only limits you have are those you accept as reality in your mind. When you step out of the box of limited expectations, you will find that the world will begin to bend to your will. The energy you emit because of your confidence and the actions you take because of it will literally cause the entire universe to conspire on your behalf to bring you the things you seek.
Okay, now that I have that out of the way, let’s get to the reason that you are here. Once you have straightened out your thinking, your aspirations to become an entrepreneur will lead you to one unavoidable challenge — the need to fund your business idea.
Whether you need capital for your initial rollout, product development, or your initial payroll expenses, you will have to find a way to generate the necessary capital. First, you should understand that money is only one form of capital, and while it is the most fluid form, it is not the only one. Many times, you can use your current skill set to barter for things you need, or you can use your most powerful form of capital, your mind.
Moving forward, I will be focusing on creative ways that you can acquire money as capital to fund your business idea outside of the traditional methods used for financing businesses.
There are multitudinous alternatives to traditional financing, but I am going to give you 8 that have a proven track record when effort and persistence are applied. One of the greatest skills that you can acquire in the world of business, or life in general, is the ability to think laterally or creatively — meaning you must be able to think outside of the box. The first matter is to develop a mindset in which you never say never.
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It is important when you are attempting to use external funding sources to fund your startup, you must have a lucid perspicacity of the need to sell yourself more than you sell the business idea.
Following are 8 proven funding strategies that exist outside of the traditional funding structure.
- Personal Financing
While personal financing may not seem to be a creative funding idea, it is a necessary one. I am surprised at the number of people who come to me seeking advice on starting a business who have never considered the importance of saving to fund their own idea. As a rule, you will be hard-pressed to find a venture capitalist or a private business investor who will be willing to fund your idea if you do not have some skin in the game. The capital you have on hand when you approach lenders will be a testimony of how much you believe in yourself and it will represent the effort that you have invested into ensuring that your vision comes to fruition. With that being said, you should not give up if you do not have on-hand capital, but it should definitely be a part of your funding strategy. You will be surprised at how much you can save by setting aside a certain percentage of your current income for your business.
- Personal Credit Lines
In situations in which you may not qualify for a small business loan, you may qualify for a personal line of credit, which will be determined by your creditworthiness and your current income. It is possible to receive as much as $250,000 or more. Credit cards are often easier to obtain than personal lines of credit when your credit history does not support the line of credit approach. There are numerous startups that have been launched using this approach. Using either of these approaches will allow you to retain complete ownership and control of your company if you honor the obligation to make the minimum payments outlined in the conditions set out by the lender.
- Family and Friends
This funding method is sometimes referred to as tapping a hot source, primarily because your family is more likely to take a risk in funding your dreams without many of the requirements demanded by other investors, such as the proven success of an existing business, a formal business plan, a marketing analysis, revenue projections, etc. If you have a track record of success, your family will likely want to support your vision.
When entering into funding agreements with family and friends it will be paramount that you set forth all the conditions in writing to avoid confusion and conflict. The best way to position these type of agreements is by positioning them as a bridge loan or a promissory note, which will convert your business equity at a rate that will be determined by future investors.
- Peer-to-Peer Lending
While it is likely that you have never heard of peer-to-peer lending before, it has been around for years, and it is a viable alternative to traditional funding. It has proven successful for ethnic groups and small business groups that are willing to support similar ideas. When viewing this model in the context of a startup business, you will need to identify successful entrepreneurs who are willing to fund ideas like the one that inspired your business.
Crowdfunding is one of my favorites and it has emerged as an increasing favorite among startups, primarily due to the power created by the rapid expansion of the internet. There is a wide range of online service providers that provide the capacity for you to set up a crowdfunding campaign in a matter of minutes.
The concept of crowdfunding to create funding for businesses is centuries old, but the rise of social media has somewhat contaminated the idea and now it is used to fund everything including social events, surgery for pets, honeymoons and more. Nevertheless, the initial use of this funding model was to support new business ideas. In fact, several years ago, the creators of the Veronica Mars movie appealed to the show’s fans via a crowdfunding campaign, and they raised the $3 million budget in under 24 hours.
There are many nonprofit organizations and private companies that offer aspiring entrepreneurs small loans that range up to $35,000 to support entrepreneurship for individuals who cannot qualify for conventional small business loans. Two of the most prolific microlenders are Patriot Express Loans and Small Office/Home Office Loans.
- Vendor Financing
While this does not necessarily work with every business model, if you need tangible products to get your business up and running, many distributors and manufacturers can be convinced to forego payment for their goods until after they have been sold, allowing you to build your inventory at no initial cost. Although no currency changes hands, you receive capital in the form of goods under the condition of paying the distributor or manufacturer once you sell the product.
- IRA Financing
Investment Retirement Account funds and 401(k)s are arguably the single most accessible alternative funding source available today for startups. You cannot use your own self-directed funds for your startup, but many others are willing and able to loan you money from theirs, for the right terms, if they believe in you and your cause.
Seed funding can sometimes be difficult to secure through more conventional means like angel funding or venture capital, primarily because these types of investors generally prefer the less-riskier approach of investing in a proven business model that has already built a customer base and generated revenue.
The list provided here is far from comprehensive, but it does give you a place to start. One of the most valuable assets you can obtain as a business owner is the ability to think laterally — outside of the box. The more creative you are in your approach to financing your businesses the more opportunities you will create for yourself. Do not allow yourself to be boxed in by conventional wisdom. Keep in mind that some of the most successful companies on the planet were created through creative funding mechanisms. ~ Rick Wallace, Phd., Psy.D.