It’s become a cliché that the people telling you to follow your dreams are generally those who’ve had it easy. When someone like Kylie Jenner can be referred to as self-made, the term loses all meaning after all. The simple reality is that the best way to finance your dream is still to be born into wealth!
However, the world is making progress and pursuing your dream business is a lot more realistic than it once was. There are tons of business ideas that do not need much money to launch. With online resources, these businesses can begin with little to no capital.
For entrepreneurs who do need capital, there is also optimism. Today there are many ways to finance your dream business even if you don’t have generational wealth to fall back on.
If you have an idea and are raring to go but need some capital to get you started, here are the top 9 ways to finance your dream business.
1. Get a bank loan
The most traditional way of financing a business is still incredibly popular. Going to the bank with a business plan and applying for a loan is the first step for many budding entrepreneurs.
Bank loans are popular because the banks are regulated and you know exactly what you are getting. You will get a reasonable interest rate and terms that would be familiar to any business owner in the past one hundred years.
The downside to bank loans is that they are not geared towards modern businesses. Applying for a bank loan is a paperwork-heavy process that can be agonizingly slow. Also, banks will not provide unsecured loans, and many new business owners today don’t have guarantors or assets to use as security.
2. Private lenders
Business people who are unable to get bank loans are not the only ones who turn to private lenders. There are many businesses that prefer the ease of the application process and the modernity of the loan products.
However, private lenders definitely appeal most to those who think they have nowhere else to turn.
Business loans from private lenders can be unsecured. These loans will come with high-interest rates and terms that suit the lender, but they are an attractive option to startup businesses.
BlueVine has become one of the most trusted private lenders around and set a good standard for others in the industry. That said, they are not a viable option for new businesses, as they target mature businesses and have strict requirements. BlueVine loans have a minimum of 600 FICO score which is probably not a reality for you. Alternative private lenders, on the other hand, will provide even brand new businesses with loans.
3. Get a personal loan
Technically, personal loans are, by definition, personal. However, there are no rules to say that you cannot use a personal loan to fund your business idea. The reason most business owners don’t take this route is because these loans are better suited to personal matters, and defaulting on the loan because of bad luck in business will impact your personal credit score and reputation.
4. Angel investors and VCs
If being born into money is the best-case scenario for new business owners, being funded by an angel investor or a venture capitalist (VC) comes in second. VC companies look for promising businesses to fund, requiring some stake in your company. Angel investors generally require equity in your business and will provide funds as well as guidance for you to get where you want to go.
If you want full control over your business, this is not ideal, but since they have a stake in your success, VCs and angel investors often go a long way in pushing for your company’s growth. A third-party perspective is also good for business owners who can get stuck in their own idea.
5. Use your savings
Money is meant to be spent. Savings are crucial for financial security. Both of these statements are true, but the context is often key.
If you have a family who you need to support, you need to keep your savings. If you dream of retirement, you need to keep your savings. But if you are only responsible for yourself and your savings can help you live your dream, using them for your business may be the best idea.
It is a risk that only some will be willing to take. But looking back on it one day in the future, it might be a risk you regret not taking.
6. Ask your friends and family
Many people balk at the thought of asking friends and family to invest money in their idea. It may feel too close to begging, and there is always the risk that you won’t be able to pay them back. However, if you frame their contributions as investments, and give them stakes in the success of your company, it can feel like a totally different prospect.
Remember, only consider asking those who are themselves financially secure. Friends and family who are struggling with money might feel guilted into contributing and end up resenting you for it.
7. Find side hustles
If the capital you need in order to launch your company is mainly for your own salary so that you can make ends meet before your business makes a profit, finding a side hustle may be perfect. You can start freelancing, selling your services part time while spending the rest of the time building your business.
If you are skilled at writing, editing, filming, coding, etc., you can earn good money online. It is an especially great way to earn money if you are passionate about what you do. That way, you can work part-time on one passion, while building the ultimate passion project through the rest of your day. While this will still be hard work, it won’t be soul-destroying in the way working two mundane jobs can be.
8. Enter a contest
The idea of entering a contest to fund your startup business might sound strange. However, I’m not talking about buying lottery tickets. Rather, major corporations looking for investment opportunities often hold contests, allowing startup owners to enter their ideas.
It is like the concept of Shark Tank, but without the pressure of the fate of your dream being played up for dramatic purposes.
One of the most effective ways businesses make money in 2021 is through advertising. With millions of businesses around the world constantly spending money on advertising their brands, you can get a piece of the pie by including adverts and affiliate links on your business website.
This approach requires you to have a website that is already geared towards your idea. It can be as simple as a blog detailing your experiences in the entrepreneurial process or thought leadership articles about the industry your business is in. By using advertising to fund your business, you can even build partnerships with companies that provide you with affiliate links.
The above 9 ways of funding a business all have their pros and cons. Nonetheless, if you can see the success of your dream business as clear as day, you will be able to find funding in one of these methods.