Three good ways to generate money for your business idea and a bad one
‘It takes money to make money’ is the truism in today’s capitalistic society and you don’t have to go far to hear it. No matter how good of an idea you have, without capital backing it up, you won’t be able to get it off the ground.
How many underfunded Steve Jobs have lived their entire lives without being able to start their own version of Apple? How many destitute Jeff Bezos couldn’t even afford to start their version of Amazon from their garage?
The answer, of course, is that we will never know. No one spends the time keeping detailed records of business failures. No one puts failed businesses under a microscope like we do with the ones that succeed. In reality, we don’t need to. What we need to do is figure out how can potentially great ideas get the funding to have a real chance at success. Whether you are starting out in your garage or even more modest spaces, you will need to be able to fund your startup until your great idea becomes the money maker.
It’s all about the Benjamins
To borrow another cliché, ‘money doesn’t grow on trees”. It grows out of successful businesses that have access to the funding to turn their ideas into reality. The same concept works for startups. If you have an idea you polish it until it gleams, then take the idea to your local bank, a financial institution or a rich uncle and beg them to loan you the money to make your idea a reality.
If your credit isn’t great, however, the banks and financial institutions will turn you away while your rich uncle will sigh and probably give your idea to someone else who has the money. Putting your home or personal possessions up as collateral is one option, but it can be a decidedly frightening one if your idea turns out not to be the money generating machine you thought it would be.
Collateral secures a loan, so if you can’t pay it back, you lose the collateral. The trick is figuring out how to get a small business loan without collateral. Some options do exist:
- Financial institutions. Although it is rare, there are some banks and lenders who are willing to loan money for untried ideas.
- Crowdfunding campaigns. Crowdfunding is a big deal. The concept of inviting people to give you money to create your business while receiving compensation on the back end is awesome. It gives people with little money the chance to invest in something they believe in, while giving entrepreneurs another tool to make their business work.
- Personal loans. If you have good credit, taking out a personal loan or funding your business through credit cards can work if there is a definite return on the business. Credit cards have notoriously high interest rates and you could lose all your profits paying off the balance’s annual percentage rate (APR). Unless you have plenty of money or an excellent job to make the payments, this is not a great idea.
Now, for the bad option.
- Payday loans. No. Just don’t think about it. One missed payment and you are looking at spiraling interest fees and no way out from under it. Your business will be gone, your credit will be wrecked and it will take you years to recover.
Success or failure depends on how much effort you are willing to put into your business. There were many times that Jobs or Bezos or any of the thousands of entrepreneurs, who hauled themselves up through their own hard work, could have given up. We never hear about that, we hear about their success stories.
