Having sufficient capital in place is critical for staging a start-up successfully. However, the problem of raising funds can become big if the business owner does not have a sound financial backup and has a substantial personal debt to repay.
In such cases, seeking a loan from traditional lenders could be costly and might not be the best idea, particularly when a personal asset is kept as collateral. At the same time, a poor credit score could give an opportunity to lenders to charge higher interest rates, which might further add up to the existing debt pile.
But, there is hope for start-up entrepreneurs, who can try to raise funds through creative sources of financing.
- Renting out home or space – Shrinking the personal expenses bill should be the first approach of any start-up business owner. If an individual is living alone in his/her apartment or house then renting it out or sharing it with another potential tenant is recommended. Small personal sacrifices can fetch higher benefits later on by providing self-sufficiency in business.
- Grants – A number of government run organizations offer grants to those businesses, which are involved in a research oriented or scientific field. A business owner should check for any such government run program and confirm if the start-up idea aligns with the objective of such grant programs. Any business receiving grants should meet the federal research and development goals.
- Winning a competition – A start-up entrepreneur should not miss the opportunity of participating in any business-plan competition that can become a source of financing. Such competitions can help a business owner to communicate with other business experts, which might open up more doors of financing.
- Starting out as a side business – If an entrepreneur is already in a day job and plans to start a business, then he/she can start it while remaining in a job. In this way, the day job will take care of the routine expenses while an entrepreneur will have room to evaluate the direction of the business. Once sufficient funding is saved out of income, an owner could switch to full-time business.
- Friends and family – Before approaching an alternative lending platform or traditional bank, a business owner should check with people within his/her own circle if they are willing to free-up some cash for the business. Such form of lending often comes at low or no interest rate costs and does not involve hassles of credit score or collateral.