Startup Success: How to Fund Your Business Without Going Broke

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While the reported statistics vary, between 70% and 90% of business startups fail. I know that isn't a great stat to start an article about funding your startup, but it's important to go into business with a clear understanding of the risks.

If you mortgage your house, clear out your bank account, and borrow from everyone you've ever met, there's a good chance you're going to go broke. Don't worry, there is good news. There are several ways to get your startup off the ground without selling the farm.

Small business grants

Small business grants are funds offered by different organizations that do not have to be paid back. Generally, they're provided to small groups based on shared traits. For example, a veterans group might offer grants to other veterans.

The Small Business Administration provides grants for veterans, community organizations, and educational organizations. Your state or county Chamber of Commerce may offer grants or maintain a database of available grants.

While grants do not have to be repaid, businesses often have to apply and meet specific criteria that can vary by grant. Grants can also be very competitive, with far more applicants than funds to go around.

Small business loans

Not all debt is bad debt. Small business loans through reputable organizations like the SBA can help you access funding. Most small business loans have favorable terms and may even offer lower interest rates if you have a decent credit score. Depending on the loan provider, you may be able to access funding much faster than using other methods, like grants or crowdfunding.

Crowdfunding

Platforms like Kickstarter and Indiegogo allow new business owners to raise funds by gathering small contributions from a large number of people -- without giving up equity in their businesses. By showcasing your ideas directly to your target audience, you can receive financial support from people who believe in your business model.

To be successful, you'll need to tell a compelling story and explain why your business exists and what problem it solves. Offering incentives or perks -- such as early access, limited editions, or personalized thank yous -- can encourage people to contribute.

By providing incentives and fostering a sense of community around your project, crowdfunding can be a highly effective way to raise capital without losing ownership of your business.

Business credit cards

Business credit cards are a fast way to get funding, access to rewards programs, and a chance to build business credit. They provide flexibility in managing cash flow, especially for short-term expenses. For example, you can put the cost of manufacturing on a credit card and then pay the bill when customers buy the items. Or, if you own a food truck, you could purchase food items and then pay the bill with your monthly profits.

However, this strategy can also be risky -- for example, if your stock doesn't sell quickly, you may be stuck with a bill you can't pay. Credit cards also tend to have a higher interest rate than business loans. Relying on business credit cards long term can impact your business's financial growth by making it harder to secure funding later due to business debt.

Strategic partnerships and bartering

If you're willing to network and get creative, strategic partnerships or bartering with other businesses can help you secure resources without risking your business's financial future. By aligning your company with complementary businesses or service providers, you can access skills, services, or products that your business needs.

For example, a marketing agency might offer social media services to an IT company in exchange for website or networking support. To avoid misunderstandings, write up a contract to make sure both companies understand the specific terms of the trade. Both sides should feel the arrangement is equitable.

When considering funding options, it's important to compare all the options and find the best fit for your business. Whether you use grants, loans, crowdfunding, credit cards, or partnerships, a thoughtful approach will help you fund your business without jeopardizing future opportunities or financial stability.

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