How to get Startup Funds in 2024: A Complete Guide For Local Business Owners!

How to get Startup Funds in 2024: A Complete Guide For Local Business Owners!

Are you thinking about starting your own business? Well, the first question that might have come to your mind was, “How do I get the funds to start my business?”. The good news is that this question can be answered in two words: startup funds.

Starting a small business requires a considerable amount of money. Furthermore, the success and failure rate of small businesses varies greatly. Moreover, unless you already have this money (called capital) on hand, you will need to get this money from some other legal means. Furthermore, one of the methods of getting the required capital for starting your business is by gathering startup funds. 

Startup funds can be acquired in many ways. However, 27% of small business owners fail to get the necessary funds needed to launch their business. Therefore, in this article, we will be showing you some of the ways you can get start-up funds to finance your new business.

Once you get the required start-up funds to launch your business, you might want to consider growing your business to make your business more successful. For tips on how you can grow your business, please see the following article: How to Grow Your Retail Business in 2024: A Definitive Guide For Growth

Ways To Get Start-Up Funds.
Ways to Get Start-up Funds

Ways to Get Startup Funds for Your Business

Let’s now look in detail at some of the ways you can use start-up funds to launch your new business.

Savings And Earnings
Savings and Earnings

1- Savings and Earnings as Startup Funds

Arguably the best and easiest way to get start-up funds is by using your own hard-earned money. Money saved from a part-time or a full-time job can be used as start-up funds for launching your business.

The biggest benefit of using your earnings and savings is that you will not have to pay back anyone. Furthermore, by using your savings and earnings you will not be indebted to anyone. This will be a huge weight off your shoulders. Moreover, you will also get a special feeling of accomplishment by using your own hard-earned money to finance your business.

If you plan to use savings as start-up funds for your business, then you will need lots of it. Moreover, for most people, their savings and earnings will not be enough as start-up funds for launching a new business. Therefore, you may still need outside sources to raise an adequate amount of start-up funds for your business. 

Furthermore, according to Fundera, the average start-up funds needed to launch a small business is $80,000. Which is a huge amount of money! Therefore, many people will need to supplement their earnings and savings with other start-up funding methods.

Borrow From Friends And Family
Borrow from Friends and Family

2- Borrowing from Family and Friends

The second-best risk-free option to get startup funds is to borrow them from your family and/or friends. This option is far less risky because you are borrowing from people with whom you have a close connection. As a result, you will not have to borrow startup funds from some corporate institution. Especially, those institutions whose only goal is to profit by lending you startup funds. 

Borrowing startup funds from family and friends can fall into one of two categories: really easy or really difficult. The category you end up in really depends on the following aspects:

  1. How trustworthy you are (regarding finances)
  2. How supportive your friends and family members are
  3. How much do your friends and family like the idea of your startup business

If, for example, you are a person who is great with money and is not known to overspend. In addition, you have a good record of paying people back what you owe them. Then your family and friends will feel more comfortable lending you startup funds. This is because they know you will pay them back. 

However, even if you are a trustworthy person, in some cases, your family or friends might not be the most supportive kind. Therefore, it could be difficult to convince them to lend you the startup funds for your business. In this case, you will need to provide some solid reassurance to your friends and family to convince them to lend you some start-up funds. However, if they still disagree, don’t worry, because there are still other options to explore. 

Borrowing from friends and family may seem like an easy way to get startup funds. However, there can still be a few complications from borrowing startup funds from family and friends. For example, you will need to pay your friends and family back once your business gets off the ground, which can be difficult if your business does not succeed. Moreover, if you are unable to pay them back, then this can have long-term consequences. Both in financial terms and in terms of relationships with your family and friends. Therefore, it’s a good idea to only borrow start-up funds from family and friends who are close to you, can tolerate financial losses, and (above all else) believe and support you.

Continue Your Day Job
Continue Your Day Job

3- Keeping a Day Job

Keeping a 9-to-5 day job is another way you can get start-up funds to launch your business.

The most common career route for a lot of people is to get a day job in some designation for a company. Moreover, having a day job is an excellent source of income that can later be used as start-up funds to launch your business. In addition, people who have dreams of owning their own business usually spend quite a few years at a day job where they can gather the required start-up funds. Furthermore, once the required start-up funds have been gathered, people either:

  1. Quit their day job and start their business
  2. Or keep their day job and run their business at the same time

By keeping a day job you can save a percent of your salary and after a few months or years, you can use these savings as start-up funds to launch your business. However, unless you have a high-paying job, you will find that it is very difficult to save money for startup funds for your business because you will also have many other expenses to take care of with your salary. The money that you can save from your salary, and use as start-up funds to launch your business depends on the following factors:

  1. Job designation – the higher your position, the higher you can save
  2. Expenses – The fewer expenses you have, the more you can save
  3. Lifestyle – A simple lifestyle will earn you more savings as opposed to a lavish one
  4. Family – The more dependent family members you have, the less you can save

Time is another factor to consider when you are saving to gather start-up funds for your business. Do you want to launch your business as soon as possible? Or can you afford to wait for a few years? Furthermore, your saving “rate” should align with when you want to launch your business. If you want to launch your business on a specific date, then you will need to manage your savings so that you don’t fall short before the deadline. However, if time is not an issue for you, you can then take a more relaxed approach to save your money.

Even if you do manage to save a small amount of money per month, it could take a long time for you to gather the minimum startup funds needed to launch your business. Therefore, although having a day job can certainly help gather start-up funds for your business, you will need to save a significant amount of money every month to reach your goals quickly. 

Once you get your business up and running, you need to promote your business to make sure that people are aware of it. Please see the following article on how to promote your business:  Which apps should you use to promote your local businesses?

Crowdfund Your Business
Crowdfund Your Business

4- Crowdfunding for Startup Funds

The next way to gather start-up funds for your business is by crowdfunding.

Crowdfunding is a way to raise start-up funds by accepting donations or support from large groups of people, called crowdfunders. Furthermore, crowdfunders are people who want to willingly support your business or project without getting anything in return. Therefore, crowdfunding is a great way to raise start-up funds from like-minded people who share a similar passion as you. 

Crowdfunding is a relatively low-risk way to raise start-up funds because, unlike Investors, you don’t have to pay back your crowdfunders the money they invested in your business. In addition, you get to retain full control of your business through crowdfunding. However, you can offer crowdfunders of your business certain “gifts” to show your appreciation for their support, and to encourage other people to back your business. Furthermore, the “gifts” you could offer your crowdfunders could be things such as free samples of your products or an exclusive discount for supporters.

Crowdfunding works like this. Let’s say you have a business idea for which you need to raise start-up funds. To raise the start-up funds, you will need to post your idea on a website explaining things such as what your business is all about, what it offers people, how it helps your community, etc. Once people see your post, they can take two routes:

  1. If your business idea speaks to them on an emotional level, they might decide to support your business by giving you a small donation.
  2. Or they might decide that your business idea does not interest them very much, in which case they won’t make any donations.

Therefore, the success or failure of your crowdfunding campaign entirely relies on whether you can find enough people who are willing to support you in your business.

The downside of crowdfunding is that it all depends on whether you can find people who are willing to support your business for free, and this can be quite a difficult feat. Furthermore, there is also the chance that your business idea might be very niche to capture a lot of people’s attention. In addition, crowdfunding can be the slowest way to raise start-up funds because there is simply no way to speed up crowdfunding. All you can do is post your business idea (on a website) and appeal to people for support, and then all you can do is wait for your target to be reached.

There are many crowdfunding websites such as Kickstarter and Indiegogo that make crowdfunding easy to carry out. Just be sure you are aware of your legal and financial obligations towards the people who show support for your business.

Get A Loan
Get a Loan

5- Small Business Loans as Startup Funds

Another way to get start-up funds is through small business loans. Banks, credit unions, SBA, and other financial institutions give out small business loans.

To raise startup funds, and retain full control of your business, you can apply for a small business loan. Small business loans are startup funds that financial institutions give business owners. Furthermore, these loans are given to business owners who are looking to open a new business.

To get a small business loan, you must convince the lender to trust you to pay them back. Furthermore, you will need to convince your lender that the business you are starting will be a profitable one. Moreover, to prove your business is worth lending money to, you may need to show your lenders things such as a business model, financial projections, expense sheets, etc. Having these items on hand will surely increase your chances of getting a business loan. Moreover, it gives your lenders more confidence to lend you the start-up funds you need.

Applying for a small business loan might seem like an easy route to get start-up funds for your business. However, it can be sometimes challenging to try to convince financial institutions to give you a loan. Furthermore, even if you do manage to get a loan approved, paying it back can be quite stressful. Especially if you don’t properly manage your time and money. 

Paying back a loan can be either done in installments or the loan can be paid in full. The problem is that an interest rate is levied on the amount which is lent to you. Furthermore, if you delay your payments, the interest rate will cause the repayable amount to increase slightly after every delay. Therefore, in the end, you may end up paying more than what you borrowed. This makes small business loans a risky way to get start-up funds for your business.

Once you manage to get a loan and your business up and running, you may want to create a business website. A website is perfect for reaching more people and raising your brand awareness. Furthermore, your website can also be used to bring more people to your physical stores by adding a product and store locator to it. Moreover, you can use a product and store locator software, such as WP Maps, to instantly add a product and store locator to your website.

For those who are already using the SOCi or Where to Buy store locator on their website, we highly recommend switching to WP Maps, because WP Maps is a superior SOCi alternative and a better Where to Buy alternative.

Alternatively, instead of a website, you can create an e-commerce store for your business to raise your online presence. An online store will provide an additional source of income for you from buyers who prefer shopping on the internet. There are many platforms you can use to easily create an online store such as Shopify, WooCommerce, Magento, etc. See this guide if you are looking to create the best Shopify online store for your business.

Credit Cards
Credit Cards

6- Startup Funds Through Credit Cards

Using a credit card is also a valid way to get start-up funds for your business.

Similar to applying for small business loans, a credit card is used to borrow funds, which you pay back. Therefore, this makes credit cards a quick and easy way to raise a partial or full amount of start-up funds. 

Unlike small business loans, you don’t need to convince anyone to get start-up funds from a credit card. Furthermore, all you need to get startup funds is a credit card with a significant credit limit (preferably $20,000). In addition, to access the funds in your credit card, make sure you have no outstanding balance due. With no outstanding balance, you will be able to access the full credit limit of your credit card.

Keep in mind that the start-up funds you get from your credit card will be subject to an interest rate. Furthermore, this interest rate can make the payback amount larger the more you delay the return payment. Therefore, be sure that you are able to pay back the borrowed amount in a timely manner.

Get Investment From Investors.
Get an Investment

7- Startup Funds Through Investors

The last way to get start-up funds on this list is through investors. Investors are people who are willing to provide you with start-up funds for your business in exchange for equity. Having equity makes them part owners of your business.

The good thing about getting startup funds from investors is that you don’t need to pay them back the amount they invested in your business. Instead, in exchange for investing money in your business, an investor will expect to receive equity in your business. However, by giving equity to investors, you are essentially transferring part ownership of your business to your investors. Therefore, to retain full ownership of your business, consider some other methods to raise startup funds for your business.

To convince people to invest in you, you will first have to seek out investors. Furthermore, you have to convince investors that your business is worth investing in. This is usually done by:

  1. Providing evidence that your business will provide a great return on investment for your investors
  2. Presenting a new innovative solution to a problem
  3. The market opportunity your business presents
  4. The quality, passion, and integrity you display for your business
  5. A clear business model and a business plan

Once you have convinced investors, you can then negotiate how much start-up funds they will need to give, and how much equity of your business will be transferred to them. For example, in return for an investment of $20,000, you could give your investors equity of 25%. With 25% of your business belonging to your investors, you will retain 75% equity in your business, making you the majority owner.

Getting investors to provide startup funds is a great option for potential business owners who would prefer not to be in debt. However, you will need to give away part of your business to get start-up funds from investors. After all, nothing is free in this world.

Conclusion
Conclusion

Conclusion 

Unless you already have the required amount of start-up funds with you, you will definitely need some form of startup funds to be able to successfully launch your business.

There are multiple methods to obtain startup funds from outside sources, these methods range from loans to donations to investments. Furthermore, each method to obtain start-up funds comes with risks, rewards, challenges, and problems. Therefore, it will be entirely up to you to decide which way to get start-up funds for your business will work best for you.

Hopefully, the ways to get startup funds mentioned in this article will give you a good idea on what is the best way to get start-up funds for your business.

If you would like to explore more diverse topics related to e-commerce, please see our blog page.

Waleed Daad Khan

Waleed Daad Khan

Digital Marketing Consultant

Waleed Daad Khan is a results-driven Marketing Consultant with a passion for Businesses. He holds certifications From Wharton, McKinsey, Hubspot and SEMrush, and has helped businesses of all sizes improve their online visibility and reach. With 4 years of experience in the field, Waleed stays up-to-date on the latest digital marketing trends to deliver cutting-edge strategies.

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