8 Ways to Raise Money For Your Start-Up

Even though small business lending is in an upswing and big banks are once again beginning to push additional resources into small business, entrepreneurs and business owners are continuing to struggle for working capital, accounts receivable and start up financing.

Additionally, the government shutdown is now putting additional financial pressure on these small businesses, which is why Todd Hills, the founder of Pawngo, the first online pawn shop in the U.S., has put together a list of ways on how to raise money for your business.

1. Bank Financing

Bank financing is the most popular way that entrepreneurs raise capital for their business. During the process, your banker may request that you have your loan guaranteed by the Small Business Association (SBA) before approval.  The SBA is a government agency who will guarantee up to 80% of the value of the loan.  This is not a good option if you wish to get a loan quickly.

2. Angle Investing

Angel investing is very much like the popular TV show Shark Tank, as an angel investor are entrepreneurs who have already found success and are looking to invest their funds back into start up businesses. Besides the financial investment, the benefits of receiving an angel investment are the advice and connections of your investor. Some of the biggest networks which connect entrepreneurs and investors are Golden Seeds, Tech Coast Angels and Investors Circle.

3. enture Capital

A venture capitalist is similar to an angel investor, except they only contribute money.  A venture capitalist aims to invest in the early stages of a business development that are showing a high growth potential.  Through this type of funding, the venture capitalist usually receives equity in the business or a mix of equity and debt financing in exchange for the funds.

4. Credit Cards

They should only be used as a temporary measure between jumpstarting your business and obtaining other funds. Coming with hefty 10-20% interest rates, credit card loans should not be used as long term capital. However, there have been entrepreneurs, such as the funders of Google, who have maximized the funds from a credit card loan and successfully funded their company.

5. Pawning

Pawning is a great way to get a short term loan, fast.  By pawning a high-end piece of jewelry or watch business owners can solve short-term financial problems without affecting their credit.  However, like a credit card loan, these loans may not be large enough to jumpstart a business, and they usually come with a 6-10% interest rate. The pawning industry has evolved, and now you don’t have to go into a brick and mortar store, you can receive a loan from an online pawn shop.  You just send in what you want to pawn, get it appraised, and if you like the price they are offering, you get your money.  Some of the best pawn sites are: UltraPawn, Pawngo, IPawn.

6. Family & Friends

Loaning from the people who want you to succeed and may even want a stake in your business, can be problematic.  For one, it can create strain and ruin relationships, as over 50% of start-ups fail in their first 5 years.  Additionally, you don’t want to financially burden your family and friends, so be sure to only borrow money they can afford to lose.  As always, put any lending agreement into writing and all of the terms for both parties should be clearly laid out.

7. Crowd Funding

Crowd funding is when your project is funded by the public using their own personal funds.  Once you propose the idea you want funded, people then choose how much they are willing to give.  Most crowd funding sites use a reward base model where people who invest in a new business venture are given a reward, whether it be free samples or discounts of the product produced.  Some of the best crowd funding sites include: Kickstarter, Indiegogo and Fundable.

8. Partner

Partnering is always a good option if you don’t have enough funds, and you know someone who does.  When partnering with someone it is important to make sure their goals align with yours and to remember that they will also have control over the direction of the business, unless otherwise specified.  Finally, it is also wise to have a buyout agreement within the contract, in case of a breakdown in the business relationship.