How are you going to fund your new venture?
There are ways to launch lean startups and even get into real estate investing with little to no money of your own. That doesn’t mean no money is required. It can take money to make money. Especially if you want to go big, and go faster. Sometimes that means being more creative with what you’ve got. Or it can mean serving others by putting their money to work for them. Whatever you are starting or growing; here are seven options for providing the financial fuel to get from here, to where you want to be…
- Work & Save For It
One method that some use is to try and work hard, and save up enough to get going. Sometimes that requires taking on an extra job or two, looking for a higher paying job, and often cutting back on spending to create some surplus. For most, this simply just takes too long, or doesn’t work. By the time they’ve saved enough the opportunity is gone, or they need even more money. Plus, they’ve lost years of time hacking, compounding gains in the process.
- Leverage Your Savings
For those that do already have some savings or investment funds, leveraging that money can help. Many who have worked and saved or who have inherited money may not want to spend it or risk losing it. Borrowing against this collateral may be a more attractive option. For example; you may be able to borrow against a 401k, CD, or life insurance policy. The original capital stays in place, looks good on your balance sheet, helps to obtain better rates on borrowing, and the interest earned can offset any paid on borrowed money. For example; if you are getting paid 2% interest on a certificate of deposit, and pay 4% on a secured loan or line of credit, and make 14% per year by investing the borrowed money in real estate you are only paying a net rate of 2% for borrowing, and are pocketing 12% net returns.
- Personal & Business Loans
Personal and business loan lines of credit are making a comeback. Traditional banks may not be a great source for loans these days, but there are many newer lenders who specialize in these types of funds. And they are getting pretty aggressive about advertising them. This may include financing sources like Lending Club or PayPal Working Capital.
- Friends & Family
Borrowing from friends and family can sometimes be a bit of a precarious issue. It all depends on how prepared you are and the system you are using. If you have a solid and proven business system, a good support team, and you’ve planned well, you can deliver great returns for those you care about most. If you don’t want to borrow, you can even give them an equity position and make them partners in your new venture. If what you are on to is that promising and profitable, then you really owe it to them to give them the chance to participate.
- Fundraise for Seed Capital
Before you get anywhere near going on Shark Tank or pitching venture capitalists in your pajamas, you can try fundraising for seed capital. That’s the money to get you going. With a good pitch deck you may be able to swing the attention and backing of some local angel investors. Just make sure you do your research. Fundraising, even via crowdfunding platforms can be very expensive. One of the most highly reviewed books written on this so far is The Art of Startup Fundraising. Worth checking out if you’ll be going this route.
Mortgage loans can be a great way to fund a variety of ventures. Mortgages can be used to access equity you already have, to invest in new properties, or to finance businesses with real estate assets.
- Private Money Lenders
There are also private money lenders out there who are actively looking to fund startup ventures and real estate investments. They are not ‘loan sharks’, but regular individuals who happen to have the money and who want to invest it with others and earn good returns. Help them out, and great win-win deals for both of you.