How to Finance Your Startup Without Venture Capital and Angel Investor

Venture capitalists and angel investors can be very useful external sources of capital for established businesses, but the value they bring to new ventures and start-ups is questionable at best. Entrepreneurs should aim to finance their ventures by means other than venture capitalists, private equity and angel investors unless a large fortune is needed to finance business start-up activities or they choose to work with investors specifically focused on very early-stage start-ups. Here are eight strategies in which many entrepreneurs might choose to finance their ventures:

Business Credit Cards
Many successful businesses, such as Under Armour, were financed through credit cards in the very early stages of their venture. While credit cards are not necessarily the most ideal source of financing as they do have their drawbacks, if used correctly they can be a very effective source of financing.

How to use a business credit card correctly:
- Effectively manage cash flow by not having to pay for purchases until the end of the billing cycle.
- Use to pay for start-up fixed and upfront costs so you can make your first sale
- Plan ahead on how you will pay off the balance, then create a backup plan

Things to look for in a business credit card:
- If you will be carrying a balance, look for low APR
- If you will not be carrying a balance, look for great cash rewards and introductory promotions

Supply Chain Financing
If you are selling goods, see if your supplier, manufacturer, or distributor could issue you a very favorable loan or line-of-credit. After all, the more successful you are, the more successful they are, and they understand this. You will be surprised how common this is - many suppliers, manufacturers and distributors even have set procedures for these circumstances. All you have to do is ask.

SBA Microloans
If your venture needs less $35,000 or less, you should consider taking out a microloan. A microloan is a small, short-term loan available to small businesses that can be used as working capital or towards purchasing new inventory, supplies or machinery. These microloans are made available through the SBA but are distributed by intermediary nonprofit community lenders. Although these loans usually do require some sort of collateral, they also provide very favorable terms and are quick and easy to receive.

Business Plan Competitions
There are numerous business plan competitions across the country dedicated to awarding prize money to selected entrepreneurs to finance their businesses. While the vast majority of these competitions are directed towards undergraduate and graduate students, there are plenty of local and state competitions opened to the public.

Many schools such as University of Texas Austin host business competitions opened to all students at accredited universities. Other colleges such as University of Maryland host competitions open only to their students.

If you are not a student, don't worry. Try searching Google for business competitions in your state or county as many local chambers of commerce host competitions to support local businesses. For instance, there is the Washington DC Economic Partnership Competition, Jefferson City Area Chamber of Commerce Competition, Enterprise Center Boston Competition and the Bizzy Awards.

All of these competitions are great because not only do you get great experience pitching your idea to investors, but you have the opportunity to win a substantial amount of free money and receive tons of free press.

Grants
Grants are essentially free money, and are one of the most desirable sources of funding for just that reason. Unfortunately, they are also one of the most difficult to obtain. Most grants are awarded by state and local governments, and most grants are reserved for businesses that have the potential to provide a great service to the community, such as medical research and high-tech companies. Searching for grants can be a very grueling process with scams around every corner. Start your search at Grants.gov and State Small Business Grants, and be weary of any non-government or for-profit entity.

Personal Savings
While not the most creative source of financing for a start-up, personal savings remains to be one of the most popular methods. Personal savings allows entrepreneurs to own 100% of their company's equity. Relative to other financing methods, personal savings provides very attractive terms as it leaves you liable to no one but yourself, and the cost of capital is simply the opportunity cost of investing that money elsewhere. Personal savings should always be strongly considered as it is one of the most ideal sources of financing.

Friends and Family
Not even experts agree on the role friends and Drew Schaefer family should play in financing a start-up. In one hand, financing from family and friends can be fairly simple and straight forward as there is already a mutual respect and understanding. Friends and family will be more willing to give you very favorable terms and might also be less stringent in their rules on how the money can be used. However, in the other hand you have the possibility of straining important relationships in your life over money. If the business starts going sour, there could be unnecessary pressure coming from the very people you need support from. In the end, this source of financing is up to each individual entrepreneur and depends on a number of specific circumstances.

Financing Business Expansion & Business Commercial Finance Mortgages

A lot of theories have been propounded and even studies have been advanced on the subject of business expansion. But one that is worth taking note of is the study of Dr Ichak Adizes. In most of his research, he brings out the fact that every association has its evolution and it builds up starting from a normal formation stage and progresses into a mature stage. At every phase of its existence, the association will have to experience upheavals. In most cases, success in business will only have to be experienced by those business owners who have all the resources, the expertise as well as the experienced required in sailing through financial difficulties. The following lines will identify the various ways through which a business can be financed as soon as it is set up and even right up to when it is fully established in the market:

The Formative Phase of the Business

This is one of those very delicate stages in which every entrepreneur will want to take all measures not only in making sure that the business takes off smoothly, but to ensure that the business has come to stay for Drew Schaefer good. What every type of business will need at this phase as identified by Adizes is a running capital and an appropriate administration to take care of that capital. What should be observed at this phase of business is that so many unforeseen circumstances may come up. It is for this reason that enough capital should be hoarded to take care of any unforeseeable risk. What the entrepreneur has individually gathered may not be enough. Therefore, it is good that a resort to angel financing, venture capital, corporate venture capital and loans is opted for. Keep in mind that once a business is at this starting phase, it will need a lot of finance to surmount the odds often posed b market forces or even from competitors. This is necessary for a continuous operation.

The Business Flow Phase

This is phase where the business is already running and it is at least expected that the inflow of money is certain. This is also a phase at which the entrepreneur starts to develop some form of confidence that the business will thrive amidst the odds. Although the entrepreneur will have some measure of satisfaction, there is a need to obtain some form of security for the future of the business. This is the main reason why much of what is received in the form of profits should either be ploughed back into the business or should be used to acquire some fixed capital that the business can rely on in the future. The business can also use this to employ more qualified staff.

The Youthful Phase

This is a phase in which the business will experience a lot of unpredictable circumstances. It should be noted that growth in the business will still be experienced, but this will not be stable. It is certain that at this phase, the business will already have made some significant amount of savings. It must also have gained some standing within the business environment and can conveniently surmount any hurdle within the business environment. The money that has been saved should therefore be taken to counter any shortcoming. But the entrepreneur should also make sure that the business can first of all rely on what it has kept in stock rather than seek for external help.

The Mature Phase

This is a phase in which almost everything is certain. Every objective must have been put in place and every priority must have been identified. Growth or expansion at this stage should be maintained to remain stable. The business should also seek for means of spreading out its risk by opening up to possible investors. Also remember that this is the stage in which financing becomes much easier to obtain. This is because the business must have developed some credit worthiness.

An understanding and appreciation of all the phases that your business goes through is important if you have to maintain its growth or develop ways to compete within the business environment.

Entrepreneurs Find Personal Loans Can Help Finance Business Startup Expenses

Being short-term loans that assist your immediate cash needs, personal loans can help finance business startup expenses. Typically personal loans are a single payout loan with a high rate of interest. The borrower usually returns the loan with interest in one go rather than paying monthly installment. In general, personal loans are not recommended due to their high interest rates. A borrower may find it difficult to repay the whole debt in a single shot, however, with business startup's the case is indeed different! Let us see how different finance options can save the day for business startup's.

Typical Business Start-up Expenses

Once you have decided to start a business you will most likely have a solid business plan that will detail your initial financial requirements. Typical business start-up expenses can be broadly divided into overheads and variable expenses. One thing that remains constant with almost every new business, is that you need some money to purchase inventory, lease a building, start an advertising program and work towards your first sale. Personal loans are extremely useful in financing those overhead expenses that usually occur at the beginning as a one-time cost. Variable expenses are those that continuously occur in the process of conducting a business and are generally tied to sales projections.

For instance, in case of a software business start-up, the administrative costs, licensing costs, initial infrastructure setup cost would constitute overhead costs. On the other hand Drew Schaefer client visits, traveling for demonstrations etc. would constitute variable costs that will keep occurring every time there's a potential client and may not be predictable. Also, irrespective of sales, overhead costs will still remain to keep your setup active!

Before you borrow any money, it is vital to have a repayment plan as well as projected business plan, to understand how your cash flow will operate. Once you segregate your expenditure into fixed overhead costs and variable expenses, you need to sort out the expenses that will be one-time events. A business loan or credit line can help with these one-time costs provided your business is able to afford it once projected sales begin to be realized! You need to anticipate all possible scenarios and ensure enough cash flow over the period of few months before you take a personal loan.

Types of Personal Loans

The beauty of this financing, is that it often can be obtained with or without security collateral. A secured personal loan involves borrowing against an asset such as your property. If you default on your repayment, the lender can claim your asset! On the other hand, unsecured financing, does not need collateral, however, the lender generally protects his loan from possible default by charging you a high rate of interest. In the event of a default, the lender may resort to legal channels to recover the amount.

If you are confident of repayment, it is best to go for a secured personal loan wherein you can negotiate a low annual percentage rate (APR) while pledging your property or car or any other asset.

If your business startup requires funding that cannot be met by a single personal loan, you may even borrow more than one loan. The more you expose yourself to the debt scenario, the more financial risk you're exposing yourself and your business to. It is important to conduct thorough research and prepare for contingencies. It is always best to dig into your own savings or borrow from close relatives if they're willing and able however, for those that need instant cash and a huge amount at that, a personal loan could be a lifesaver. In fact, if you successfully repay your personal loan within the stipulated time, you could even get a good credit score which in turn will be better for the future of your business!