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Where Startups Find the Necessary Funds

Image by StartupStockPhotos from Pixabay
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Every startup has its own story. This odd fact of life is especially true when it comes to funding. Some new owners are able to rely on ample savings while others struggle to put together the minimum amount of funds to get going. The good news about gathering financial resources for a fresh business venture is that there are so many ways to face the challenge. Plus, you need not have a fat savings account at the ready. Here are some of the most common ways that entrepreneurs subsidize their dreams.

Personal Loans

It’s common for startups to have no established line of business credit. That’s a given for any new enterprise. It often takes at least two years, even for a successful enterprise, to get a bank loan in the company’s name. The most common way owners of small businesses acquire seed money is with a personal loan. Of course, if you have less-than-perfect credit, it could be next to impossible to get this kind of loan. That’s why it’s essential to build a good track record of paying bills on time and not carrying too much debt for a year or more before moving ahead with your startup plans.

Life Insurance

There are two ways of selling your life insurance and cashing out. The first is one that startup owners typically use. It’s called a life settlement. A third party purchases the policy from you for a cash amount that is often greater than the cash surrender value. Many people who feel they no longer need coverage get money from their policies in this manner. Keep in mind that policyholders also sell for greater than the surrender value in a process called a viatical settlement. Usually, this is done to pay for end-of-life medical expenses, leveraging the market value of the policy as a way to reduce financial stress in what can be a very trying time. It’s best to contact a company that does viatical or life settlements when you want to start the process and get cash from your existing policy.

Home Equity Loans

Hundreds of today’s largest corporations started out with money from home equity loans. Often, owners and entrepreneurs work in twos or threes when they found a company. Collectively, a group of people can amass a substantial amount of funding when they all borrow against the equity in their homes.

Family & Friends

Whether you opt for the social media, crowdfunding solution or not, the main source of creating your business funding often comes from relatives and acquaintances. The key to making this method work is to leverage every network you’re a part of, including college associations, church groups, family, former co-workers, and anyone else on your active email list.

Side Jobs

Read a half-dozen “About Us” pages on corporate websites and you’ll discover something very intriguing. A large number of successful organizations got their startup funds from the founders’ savings accounts, the bulk of which came from working multiple jobs for a number of years. Even taking on a part-time position for a year can help beef up savings accounts and get your new entity off the ground in good form.

Image by Jean van der Meulen from Pixabay

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