Learn how to fund a business
Understanding how to get funds to start a business takes strategy
Whether you’re seeking funds to start a business or grow an existing one, there’s more than just money on the table – your dreams and passions are also on the line. You have a business idea that inspires you, and you need financing to make it a reality.
What’s critical to realize is that learning how to get funding for a business is a two-way street. You can’t acquire funds without a business map that’s attractive to investors and lenders, but you can’t create that map without a plan for obtaining funds. So how do you go about learning how to get funding to start a business or grow your company once it’s off the ground? Understanding how to fund a business boils down to several key ingredients, including your vision, strategic planning and network connections. Once you understand how to get funding to start a business, you’re able to build a company that truly thrives.
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How to get funding for a business
Your strategy for obtaining business financing will hinge on where you are in your business cycle. If your business is still an idea in the making, you’ll need to research how to get funding to start a business. But if your business is in its infancy or adolescence, you’ll need to understand how to fund a business that’s already established.
How to get funding to start a business
Entrepreneurs are a courageous bunch. Financing a startup takes creativity and bravery, since your only collateral may be your business plan, reputation and personal outlays of cash. Do you want to know how to get funds to start a business? You need seed money, which oftentimes comes in the form of donations by friends and family or loans backed by the Small Business Administration (SBA).
1. “Family-and-friends” investments
A 2008 study by the Global Entrepreneurship Monitor determined that donations by friends and family are vital to the small business world. The study found that startup founders’ family and friends contributed an average of more than $17,000 per startup! So when you’re working on how to get funds to start a business, hold your network near and dear. In addition to contributing seed funds, your network is also a source of raving fan customers once you launch your business.
2. SBA-backed loans
When you’re strategizing around how to get funding for a startup business, you may be eligible for SBA-backed loans. Loans backed by the SBA are low-interest alternatives to higher-interest traditional loans available only to low-risk ventures.
While the SBA lending program was hit hard by the financial crisis of 2008, it is on the rebound now, having recovered by 80% in the first year alone after the financial meltdown. SBA loans are now a viable option for mastering how to get funding for a small business.
How to fund a business that’s already established
Once your business is off the ground, you’re out of startup territory. But while learning how to get funding to start a business may seem like a gargantuan feat compared to financing an existing venture, you’re still not out of the woods. To keep your business running and profitable, you’ll need to understand how to get funding for a business that’s already established.
1. Venture capitalists
As an emerging business, you have traction on the ground – the ability to demonstrate to investors that your product has a ready-and-willing market. You’re now in a position to look to venture capitalists for how to fund a business. Venture capitalists make investments on nascent, promising businesses. Since venture capitalists take a high risk – they can’t fall back on collateral if your venture fails, since you haven’t yet generated equity – you’ll need to demonstrate a plan for higher-than-average profits to make their risk worthwhile.
2. Debt or equity financing
Learning how to get funding for a business that’s already up and running often entails the use of debt financing or equity financing. Financiers are attracted to lower-risk ventures with evidence of solvency, since those ventures are demonstrably able to pay off their debts. Maturing businesses may still need secured loans for capital improvements, but those businesses do have collateral in their own assets (as opposed to only having collateral in the business owner’s personal assets). As your business develops equity, that, too, becomes collateral that’s attractive to lenders, since there’s already money on the table for debt repayment.
3. Public stock options
As your business becomes more stable, you’re able to generate stock as an option for how to get funding for a business. By making an Initial Public Offering (IPO), you offer shares of your business to the public in the form of new stock issuances. By extending investment options to the public, you’re able to bring about gains for private investors while increasing your overall investment.
How to get funds to start a business from your network
Whether you’re seeking financing for a startup business or a maturing company, your network is one of your greatest assets. Your peers, colleagues and mentors are a bedrock of support, collaboration and resources as you learn how to get funding for a business. Build your network with Tony Robbins’ Unleash the Power Within, a 3-day seminar designed to help you reach your true potential while making lasting connections. This program is an excellent place to meet like-minded people and collaborate to get financing for your company.