You might have the brightest startup plan, but without funding, you cannot implement your idea. Startups offer great products or services to niche markets. But for the business to kick off, you need initial funding. Here comes the paradox: you can’t start your business without the funds, but the lenders won’t give you money because they consider it a risky venture. However, the good news is that there are some loan options for you with zero revenue history. Here we will discuss business loan for startups.
Bootstrapping
Many entrepreneurs use up their personal savings to fund their dream project, a process called bootstrapping. It is a good way to not get into stress by borrowing funds from elsewhere. It also keeps business operations and financing under control. Bootstrapping is a good choice for startups with low costs and high potential to generate revenue in the early phase of the business. With this funding option, you will retain full ownership of your business.
Angel Investors
If you can present your business plan in detail to the investor, showing how much potential you have of making profits, then potential investors may be interested. The angel investors have good market knowledge as they are experienced. They will contribute financially in the initial phase of your business in exchange for equity.
Venture Capital Firms
The venture capital firms will give money to grow your business with increased customer base and stable business revenues. To attract venture capital firms, you should prepare a good pitch about your business, highlighting opportunities and the financial milestones you hope to achieve.
SBA Loans
It can be very challenging for a startup to get a bank loan. The bank needs to assess credit rating, proven success record, and other factors. Some bank loans require collateral, too. But startups don’t have any financial history to match the loan requirements. However, you can apply for a Small Business Administration (SBA) loan through a bank that participates in this funding program. This is a business loan for startups that reduces risk from the bank’s end. This is because the SBA guarantees to pay some portion of the loan in case the customer fails to pay back the loan. The loan application process is rigorous and lengthy, but you will get the money to go ahead with your startup.
Crowdfunding
Online platforms like Indiegogo, GoFundMe, or Kickstarter have a large group of small investors who are interested in funding startups. Lenders of this type of business loan for startups may want equity, early access to products or services, and other perks. If your business idea attracts a large audience, then you can try this funding option. To attract them, you need to have good visuals in your presentation so that they become interested in funding your venture.
Grants And Government Programs
If you are hesitant about sharing your equity with a third party, then you can apply for grants and government programs. The funds are given by local governments or nonprofit organizations. Startups in industries like education, healthcare, technology, or renewable energy have a better chance of getting these funds, as the business will make a big contribution to society.
Revenue-Based Financing (RBF)
For this type of funding, you will need to give away a portion of your future revenue to the lender. It is a flexible funding option, and you won’t have to pay any fixed monthly payments. You will pay according to your business’s revenue.
Conclusion
Fundraising for startups is very challenging. But with an incredible business plan and pitch, you can easily impress these lenders to fund your project.
