3 Primary Methods of Funding your Startup

POSTED: May 12, 2017 // BY: klc

When you have big dreams for a small business, there are many things you must consider. The first hurdle most entrepreneurs need to fly over is that of funding. For most startups, financing is going to come from multiple angles. The majority of people don’t have the cash in hand to fire up their brand new company and get the wheels rolling. Building their funding takes time, work, and creativity. There are three main sources of financing for startups that folks typically turn to that we’ll highlight here.

The Employing of Personal Assets

Making use of personal assets to fund your startup is the least expensive and most efficient method of getting your wheels off the ground. This method does present certain risks, however. By using your own assets, you’re reducing your savings and the collateral you may need for a larger loan further down the line.

The Fundraising of Startup Money

This obviously isn’t a bake sale sort of fundraiser we’re discussing here: fundraising financing for startups in Minnesota looks more like finding investors. This may be family, friends, or strangers. You might be able to find a few investors willing to shell out larger amounts of cash for your startup, or you may need to access many small investors. With their investment, they’re usually promised equity in your company, the money is given as a loan, or they invest with the promise of a reward of some sort.

The Securing of a Bank Loan

The benefit of getting a bank loan to fund your startup is that it’s typically less time consuming than fundraising and you’re not sacrificing equity in your business. You’ll have to have decent credit to qualify for a startup bank loan and the interest can range from 12-25% per year depending upon the institution which is similar to what you’d pay on a credit card. Unlike a credit card, this is a loan lump sum: the entire amount is immediately accessible from your bank account which means you’ll also be paying interest on the total sum right off the bat.

Financing for Startups in Minnesota and beyond

Whichever option you choose, it’s always wise to consult a financial institution for advice on how to handle the finances of your new business. KLC Financial is unique in our approach to startups because we’re not a bank: we’re an independent finance company able to creatively address your startup funding needs. Contact us today to make your business dreams into reality.

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