Where Do Startups Get Money
With the rise in popularity of venture capitalism and the emerging world of angel investors, it would seem that the bulk of new small businesses are getting their seed money from private sources, but a recent study shows that traditional methods of funding are still the dominant source.
Research by the Kaufman Foundation found that around 65% of financing comes almost equally from bank loans and personal savings. About 6% relied on friends and family, and just over 10% of startup cash comes from private investment. Surprisingly, another 6% of entrepreneurs use credit cards despite the high interest rates, and only 2% take advantage of available government programs.
It is highly recommended for any small business owner to consult with the Small Business Administration (SBA). Even if you are only at the stage of just thinking about starting a business, or have been a fixture on the block for years, it makes sense to find out what your best options might be for optimized borrowing or possible grant money, in order to materialize your goals.
Resources for those with the next big idea that will have the investors bidding, can post their profiles or companies on pages like Gust and AngelList. These are sites where investors can shop for you. BusinessLoans.com is a service that, like the SBA, will review your information and help determine what’s most suitable for your needs. They can connect you with their network of partners who offer long or short-term loans, lines of credit, or merchant cash advances.
As much as we love those amazing stories of angel investors and the skyrocketed success for starry-eyed dreamers, and it does happen, that story is still not the norm. The most proven route to a strong foundation and promising future is still through modest means of small loans and personal investment. Gain grassroots word of mouth through good service and effective social media, and work smarter not harder with efficient spending and operations. While it is possible to become the next venture star, and there’s no reason to not shoot for the moon, but for the vast majority of thriving small businesses their story was of hard work, smart choices, and giant leaps of faith.