Q: I have a great business idea, but no money to fund it. What should I do? — Excited But Broke
A: Dear Excited But Broke, we’re going to get you fixed up right here.
The world is resource rich and if you really have a good idea, it will be relatively simple to find the financial resources to fund your investment into your future.
As a starting place, you need to know exactly how much you need. Once you know what you need, you will begin to see things you were simply asleep to before. Synchronicity happens (and it’s always a signpost that flashes, “you are on the right track. keep going!”).
Once you know exactly what you need, you can pick from one or more of the following ways to get it:
1. Ask your parents or other family members/friends to give or loan you the money. It helps to have at least a one page plan that explains what you want to do and how it will be financially successful. Return on investment may not be that important to family and friends, but they want to be able to feel a good about their support of you;
2. Borrow from a bank. You can borrow from a bank in a few different ways:
a. Traditional revolving credit type loan, often funded by the SBA;
b. Line of credit tied to a house or other piece of collateral;
c. Line of credit tied to your personal credit score;
d. Business credit cards (based on your personal credit score, but tied to the business);
e. Business loan based on revenues of your business or a Personal Loan tied to your personal credit score;
f. Personal credit cards.
3.Venture Capital: sell part of your company to an investment firm that specializes in equity investments in start-up companies in exchange for a big exit upon sale within 3-5 years. Are you prepared to sell that soon?
4. Pre-Sales: the marketplace supports your growth by buying into your concept and pre-buying the product or service you will offer in the future.
5. Crowdfunding: often can be similar to pre-sales in which people are investing in your future growth by buying “perks” or products now. Crowdfunding may also involve no pre-sales and instead straight investment capital now that the Jumpstart Our Business Startups Act (JOBS Act) has passed.
6. Out of revenue: if you are offering a service, the fastest and best way to get into business is just to start offering your services in a one to one, high dollar package. We recommend you start by knowing what the minimum you can charge for your time is, create packages on that basis and raise your prices slowly, but surely from there.
No matter which way you choose, you are going to need legal guidance and documentation. Contact us to help you decide what’s best for your business idea and how to raise the money you need with the least risk to you, your family and your personal assets.