Financing Your Startup in 2016

It wasn’t that long ago that there were only two ways to fund a startup. One, you saved every penny you had until you had enough stashed away to float the business for a couple of years. Or two, you begged the bank for a loan. Thankfully those aren’t your only options anymore. Today there are plenty of methods you can use to raise the capital you need to get your startup off the ground. Here are six of our favorites.

Crowdfunding

Crowdfunding is, arguably, the best way to get funding for your startup or your project. Why? Because YOU set the terms of the investment. You can reward your backers however you like and your backers enjoy being a part of your process. Entrepreneurs and artists have used crowdfunding to pay for everything from studio time, tours, pop-up and startup retail shops, restaurants, renovations, etc. A successful crowdfunding campaign is also incredibly useful if you want to get the attention of investors or have a better chance of securing other funding. A successful campaign proves that there is interest in your product or service and gives you real numbers to back up your plans.

Angel Investors

Angel investors are some of the best types of investors to attract and, thanks to advancements in technology and social/entrepreneurial networking, making contact with angel investors is easier than ever. Typically, angel investors don’t give you money directly (though some might if they find your idea intriguing enough). Instead, they act as a third-party guarantor or co-signer on business financing that you’re trying to get via banks and other companies. You get credit based on their reputation instead of your own credit-worthiness. Angel investors are great because while they do usually ask for equity in the company, they are mostly hands-off when it comes to the day-to-day running and profiteering that happen within your company.

Venture Capital

Venture capital is the more common type of investment offered to startups. Unlike Angel Investors, venture capitalists often attach quite a few strings to their investment. Some may want to hold a controlling interest in the company. Others will want a share of your profits over the lifetime of your project. There are many different conditions that a venture capitalist can attach to their investment in your endeavor. Which conditions you accept, of course, are up to you.

Loans

Loans are one of the traditional methods we talked about before. While no business wants to start out burdened with debt, if you want to maintain total control over your idea and don’t want to do the work involved with a crowdfunding campaign or finding and wooing an investor, getting a loan from a bank is the most straightforward way to raise capital fast. Make sure that you try to get funding in your business’s name first. Don’t take out a personal loan unless you absolutely have to--tying your personal finances to your project’s can get very messy if your startup doesn’t work out.

Peer to Peer Lending

Peer to peer lending is exactly what it sounds like; it is getting funds from another person instead of through a bank or investment firm. Peer to peer lending is done best with people who work within the same niche or market that you’re hoping to join. They will have a better feel for whether your idea will gain traction or become profitable. Often this works best if you already have a relationship with the person you’re asking to lend you funds, though there are websites that are devoted to matching borrowers with lenders remotely.

Microloans

You’ve undoubtedly heard of the Micro-lending site Kiva by now. Kiva allows people to offer very small amounts of money to hopeful startups and people in need all over the world (though most of the focus is in the developing world). There are also micro-lending portals available to western startups as well. If you don’t need a lot of money to get your startup off of the ground, a micro-loan might be the best way to go. The interest rates are much lower (sometimes even 0%) and the repayment terms less strict.

These are six of the ways that you can get the funding you need to really get your company off the ground. Combine these with some bootstrapping techniques and there’s no reason your startup shouldn’t become the Next Big Thing.