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Starting a business is exciting and fun, but it can also feel scary and overwhelming. In fact, money is one of the biggest factors stopping most entrepreneurs from following their dreams. There is no question that launching a business with enough money to keep it afloat is absolutely vital.
It is quite common for today’s business owners to patch together money from several different sources. But where should you look for funding? Below is some advice on where to seek your funding:
Consider Credit Cards
While creating a business with credit cards might sound like a recipe for disaster (considering the possible debt, interest, and fees), it can be a good choice. In fact, some entrepreneurs believe it is an excellent choice due to the ease of getting approved, the built-in fraud protection, and the ability to earn cash back and rewards.
When looking at the use of credit cards, millennials are most likely to use credit cards to start their businesses. According to a survey of business owners and entrepreneurs by Bank of America, U.S. Trust, 37 percent of individuals ages 21 to 36 use credit cards to fund their businesses.
“Credit cards offer another means to gain access to cash and liquidity,” explains Karen Reynolds Sharkey, head of client advisory and services at City National Bank.”
However, it is important to keep in mind that there are real risks associated with using credit cards–most notably accruing debt. “Entrepreneurs should be careful because credit card debt is often in their personal name, but they’re using it to fund their business,” Sharkey says. “That means if they accrue large balances that they aren’t able to pay off, it could hurt their personal credit score and leave them personally liable for the debt, even if the business shuts down.” Her advice is to “make sure you stay current on your debt” so late payment fees and interest don’t accrue.
Become Familiar with Business Plan Competitions
Business plan competitions provide valuable feedback on business ideas and business plans, as well as providing opportunities for business funding.
These competitions are contests between startup, early-stage, and/or growing businesses. The goal of a business plan competition is for participants to develop and submit an original idea or complete their existing business plan based on specific guidelines, which are provided by the organization running the contest. Companies are judged according to set criteria, including creativity, feasibility, execution, and the quality of your business plan.
In order to find these competitions, try searching on Google. Each site has a different way of organizing the business planning competitions, so spend time reviewing each website to find opportunities that are relevant to your type of business or industry.
Below are a few popular competitions to consider:
The Rice University Business Plan Competition: This is designed to help collegiate entrepreneurs by offering a real-world platform on which to present their businesses to investors, receive coaching, network with the entrepreneurial ecosystem, fine tune their entrepreneurship plan, and learn what it takes to launch a successful business.
Last year, $1.6 million in investment, cash prizes, and in-kind prizes were awarded to the teams competing. Initial eligibility requirements include teams and/or entrepreneurs that:
–are student-driven, student-created and/or student-managed
–include at least two current student founders or management team members, and at least one is a current graduate degree-seeking student
–are from a college or university anywhere in the world
–have not raised more than $250,000 in equity capital
–have not generated revenue of more than $100,000 in any 12-month period
–are seeking funding or capital
–have a potentially viable investment opportunity
Get Seeded: This milestone grant funding program and pitch competition is designed to assist students with launching their enterprises. There are two grants opportunities: Micro-grants up to $500 and Seed Grants for $501 to $1,500.
Teams must be made up of at least one student from an institution of higher education in Utah and fulfill all of the following requirements:
–The founding student must be registered for a minimum of nine credit hours during the semester they are participating.
–A representative from your team must engage in each stage of Get Seeded (application process, pre-pitch, and final pitch)
–The funds awarded must be used to advance the idea.
The Global Student Entrepreneur Awards: This is a worldwide business plan competition for students from all majors. The GSEA aims to empower talented young people from around the world, inspire them to create and shape business ventures, encourage entrepreneurship in higher education, and support the next generation of global leaders.
At the Global Finals, students compete for a total prize package of $50,000 in cash and first place receives $25,000. All travel and lodging expenses are also covered. Second place gets $10,000, while third place earns $5,000.
To be eligible:
–You must be enrolled for the current academic year in a university/college as an undergraduate or graduate student at the time of application.
–You must be the owner, founder, or controlling shareholder of your student business.
–Your student business must have been in operation for at least six consecutive months prior to the application.
–Your business must have generated $500 or received $1,000 in investments at the time of application.
–You should not have been one of the final round competitors from any previous year’s competition.
–The age cap for participation is 30 years of age.
Think About Crowdfunding
Crowdfunding raises funds by asking a large number of people (crowds) to donate in small amounts for a short period of time. This takes place online–-often on social networks–-which makes it easy for supporters to share a cause within their social networks.
This type of funding is a great way for small businesses or startups to raise money in exchange for equity, rewards, debt, or nothing. Business crowdfunding provides you with fast access to cash, but it requires a strong promotional strategy, transparency, and typically giving up some equity in the business. Some of the best-known crowdfunding sites include GoFundMe, Kiva, Kickstarter, Indiegogo, Crowd Supply, Experiment, and Chuffed.
Today’s organizations, businesses, and individuals use crowdfunding for many different projects, such as charitable causes, creative projects, business startups, or personal expenses. The two main types of crowdfunding that are used today include:
–Donation-based funding, where donors contribute to a total amount for a new project.
–Investment crowdfunding, where businesses seeking capital sell ownership stakes online in the form of equity or debt.
It is important to be aware of the challenges associated with crowdfunding. While many people assume that crowdfunding is a simple way to make money, it requires a great deal of effort to develop a project that backers will perceive as valuable. Success is far from guaranteed, and many backers are becoming quite selective in the projects they support.
“Crowdfunding works for all kinds of companies at all different stages, but the companies that have the most successful campaigns tend to have the largest and most engaged communities behind them – usually of customers or users or other supporters of their mission,” explains Kendrick Nguyen, CEO and co-founder of the crowdfunding platform, Republic.
The bottom line is that it’s impossible to achieve a dream if you can’t fund that dream. What gives you the greatest chance of success is developing a business with enough money so that you can do it right and keep it strong. And that’s where creative fundraising comes into play for every entrepreneur.
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