How to Get Startup Business Funding with Alternative Options

Getting startup business funding can be tough, but it's not impossible. According to a study, 82% of small businesses fail due to lack of funding.

Crowdfunding is a viable option, as it allows you to raise money from a large number of people, typically through an online platform. For instance, Kickstarter has been used by over 150,000 projects, raising over $5 billion in funding.

Bootstrapping is another alternative, where you use your own savings or revenue to fund your business. This approach can help you maintain control and avoid debt, but it may limit your growth potential.

If you're a new business, traditional lenders will look at your personal credit when deciding whether to give you a loan. Your credit history is the track record of how promptly you pay your bills and is used to determine how risky it is to lend to you.

If your credit score is below 680, there may not be many options for you in the traditional lending arena. Traditional lenders, like banks, are cautious with their money. On the other hand, if your business is more established and you have good credit and at least $100,000 a year in revenue, you’ll probably find very good interest rates from a traditional lender.

To determine which traditional funding option is right for you, consider the following:

Traditional loans can be a great option for businesses with a solid credit history and established revenue. If your business has been around for two or more years and you have good credit and at least $100,000 a year in revenue, you'll likely find very good interest rates from a traditional lender.

To qualify for a traditional loan, you'll need to have a credit score of 680 or higher. If your credit score is below 680, you may not have many options in the traditional lending arena.

Before applying for a traditional loan, make sure you have all the necessary documents, including your business plan, financial projections, and tax returns.

Here's a list of what you'll typically need to provide to a traditional lender:

By providing this information, you'll be able to demonstrate to the lender that your business is stable and has a clear plan for growth, making it more likely that you'll be approved for a traditional loan.

The American Express Blue Cash Card is a top choice for small business startups looking for financing options. It offers a 12-month 0% intro APR period, perfect for funding your business without breaking the bank.

This card is ideal for earning cash back, with 2% back on all eligible purchases on up to $50,000 per calendar year, then 1% back on all purchases after. The cash back is much easier and more valuable to convert to startup funding than rewards points.

One of the best features of this card is that it won't charge you an annual fee to access all of the perks it offers. This means you can get the benefits you need to get your startup off the ground without paying extra.

Here are the key benefits of the American Express Blue Cash Card at a glance:

You'll need a good credit score to qualify for this card, with a minimum credit requirement of 660.

As a startup, you might not have the cash on hand to fund your initial business expenses, but you can use your own money to start your company through self-funding. This involves using your own savings or assets as collateral for a loan.

You can also use a business credit line or credit card to cover expenses, but be aware that the activity on these lines is reported to credit bureaus and missed or late payments can affect your credit score.

A business credit line typically has a lower interest rate and larger credit limit than a business credit card, making it a better option for larger purchases. You can use it to cover employee paychecks, large equipment purchases, and other big expenses.

If you're having trouble getting a business credit line, try again after you've been in business for six months or more. This may increase your chances of approval.

Self-funding isn't always just about providing money out of your own pocket, it also includes money loaned or given to you by family and friends. Present a business plan to anyone investing in your company to ensure they understand what they're funding.

It's often easier to ask multiple people for small amounts instead of relying on one person to fund everything. Each person in the transaction should sign a contract outlining how the money will be used and any repayment terms.

Alternative funding sources can be a game-changer for startups, especially when traditional funding options aren't available.

Business credit cards can be a viable option, allowing you to leverage your personal credit history to access business credit for funding your startup. This can be a good alternative to traditional loans.

If your credit score isn't up to par, you might consider online lenders, which 22% of businesses surveyed by the Federal Reserve applied for funds through.

Here are some alternative funding options to consider:

Crowdfunding is a viable option for startup funding, but it's essential to understand how it works. You can use platforms like Kickstarter and Indiegogo to pitch your business idea online and get upfront pledges to fund your business or product.

Crowdfunding can be time-consuming, and you may not generate large sums of startup capital. However, it's a great way to gain exposure for your young business while seeking money for the venture. If you don't meet your crowdfunding goal, you might have to end up bootstrapping the rest of your startup costs.

To succeed with crowdfunding, you need to be savvy with web content and know how to market yourself. Equity crowdfunding allows startups to raise money from a large group by selling securities, but each investment means giving up equity.

Here are some key things to consider when using crowdfunding:

Invoice factoring is a way for businesses to get cash from outstanding invoices. A factoring company pays a percentage of the invoice value upfront, usually between 75% and 90%.

This isn't a loan, so your credit score isn't a major factor in getting approved. The company will look at the credit scores of your clients instead.

The factoring company will pay the rest of the invoice once it's fully paid, minus their factoring charge and fee.

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Industry-specific grants are a great way to get funding for your business, but they can be tricky to find. They're usually open to businesses with a specific niche or operating in a specialized industry.

Some examples of industry-specific grants include the Etsy Emergency Relief Fund, which provides up to $2,500 to Etsy sellers who have been affected by a natural disaster. This fund is a great resource for online sellers who rely on Etsy for their business.

The Jobber Grants Program is another example of an industry-specific grant, providing grants between $2,500 and $15,000 to businesses in the home service field, such as landscaping or pool servicing.

If you're a business in a specific industry, it's worth exploring these types of grants to see if you're eligible. You can start by researching grants that align with your business's niche and requirements.

Here are a few examples of industry-specific grants to consider:

Keep in mind that these grants often have specific requirements and eligibility guidelines, so be sure to carefully review the details before applying.

To find the right investor for your startup, consider joining your local entrepreneurial community. This can be a great place to network with potential investors who are interested in funding new businesses and ideas.

When researching investors, be diligent and work to come to an agreement on a term sheet about your business arrangement. This will help you understand the investor's expectations and ensure a clear understanding of the investment structure.

Finding the right investor often involves networking and having a solid business plan. Angel investors, for example, typically offer $25,000 to $100,000 in startup funding, while venture capitalists often provide sums in the millions. To attract an angel investor, you need to have a unique and memorable way of communicating your vision.

Here are some key considerations when working with investors:

By carefully considering these factors and doing your research, you can find the right investor for your startup and secure the funding you need to succeed.

The American Express Blue Card is a top choice for business owners who need to fund their startup expenses. It offers a 0% intro APR period for 12 months from the date of account opening.

This means that you can pay down your startup expenses gradually without accumulating any interest over your first 12 months with the card. You'll earn 2x rewards points on the first $50,000 you spend each year and 1x thereafter.

The Blue Business Plus card has a minimum credit requirement of 700, which is relatively high. However, the rewards points can be redeemed for various business expenses, helping to offset the cost of running your startup.

Alternatively, the American Express Blue Business Cash Credit Card offers a 0% intro APR period on purchases for 12 months from the date of account opening. You'll earn 2% cash back on all eligible purchases on up to $50,000 per calendar year, then 1%.

Here are the key features of both cards:

The minimum credit requirement for the Blue Business Cash card is 660, which is slightly lower than the Blue Business Plus card. However, both cards have variable regular APRs ranging from 17.74% to 25.74%.

Venture capital is a type of equity financing that involves investing large sums of money in high-growth companies, typically in the tech industry. Venture capitalists provide the funds in exchange for ownership equity in the business.

To be eligible for venture capital funding, your business should have a solid business plan, prior experience, and a strong team. Venture capitalists evaluate your business based on its pre-money valuation, revenues, and team.

Venture capital firms often invest in companies with high growth potential, such as tech startups. In return, they expect a return on their investment, which may mean profits within a few years.

Here are some key characteristics of venture capital funding:

Keep in mind that venture capital funding can be a good option if you're looking for a quick infusion of cash to fuel your business growth. However, it's essential to be prepared to give up some ownership and control of your business.

The Texas Small Business Credit Initiative (TSBCI) has allocated $472 million to support small businesses, with a focus on traditionally underserved businesses and those affected by the COVID-19 pandemic.

TSBCI works with financial institutions to provide resources for small businesses, including loans. The program is actively monitored by the State of Texas to ensure optimal implementation.

Government grants are also available for small businesses, with examples including the U.S. Department of Commerce Minority Business Development Agency (MBDA) and the Small Business Innovation Research Program (SBIR).

These grants can provide educational resources, training, and financial support to businesses in various sectors, such as agriculture and minority-owned businesses.

Here are some loan options for startups:

The government offers a range of funding programs to support small businesses, from loans to grants.

Texas has its own initiative, the Texas Small Business Credit Initiative (TSBCI), which provides $472 million in funding to support small businesses, with a focus on traditionally underserved businesses and those affected by the COVID-19 pandemic.

The Texas Micro-Business Disaster Recovery (MBDR) Loan Program offers zero-interest loans to eligible Community Development Financial Institutions (CDFIs) to support micro-businesses affected by disasters.

Government grants are also available for small businesses at the federal, state, and local levels, covering various business types and circumstances.

Some examples of government grants include the U.S. Department of Commerce Minority Business Development Agency (MBDA) loans and targeted grants for minority-owned businesses, the Farmers Market Promotion Program for agricultural businesses, and the Small Business Innovation Research Program (SBIR) grants for small businesses with the potential to perform federal research.

The U.S. Small Business Administration (SBA) offers several loan programs, including the 7(a) loan program, the 504 loan program, and the 7(m) microloan program, which provide funding for small businesses and startups.

The SBA microloan program partners with community-based, nonprofit, intermediary lenders to provide small business borrowers with $500 to $50,000, carrying interest rates between 8% and 13% and term lengths not to exceed six years.

Here are some government funding programs for small businesses:

To access these funding programs, small business owners should be prepared to provide financial information and a solid business plan, and may need to work with a lender or intermediary to secure funding.

Texas Workforce Training offers support to businesses with fewer than 100 employees through the Skills for Small Business grant. This grant incentivizes training for new, full-time workers and existing full-time workers.

The Texas Workforce Commission (TWC) provides this support, allowing businesses to upgrade the skills of their employees. Training is provided through community or technical colleges, or the Texas Engineering Extension Service (TEEX).

To get startup business funding, you need to determine how much money you need and what you need it for. This involves crunching the numbers and displaying your business's financial track record.

Crunching the numbers means showing where your business currently stands in terms of cash flow and the level of debt you've accumulated. If your business is new, lay out a clear plan of how you're going to complete your financial goals and when investors can expect to see a return on investment.

Your business funding needs may include money to buy supplies and equipment, the cost of starting inventory or raw materials, rent for your physical store or office, and overhead for daily operation. You should also consider payments for government permits or licenses, legal and professional fees, money to pay employees and managers, marketing costs, and funds to support your business activities.

To justify the amount you're requesting, you'll need to supply written documents stating exactly how you plan to use the cash once you get it. Be careful not to underestimate your funding needs, as you should have enough working capital to support your business for a few years.

Here are some key factors to consider when determining your business funding needs:

By considering these factors and crunching the numbers, you'll be well on your way to determining how much funding your business needs and what type of funding is right for you.