Tips for self-funding a startup

Entrepreneurs launching a startup company in Illinois are probably aware of the challenges they face. From hiring staff to purchasing equipment and paying contractors, the new business will probably need plenty of cash to keep it running, but finding a way to get it may be difficult.

While many newer entrepreneurs may have personal assets, large retirement or savings accounts to help keep their business afloat, a large majority of entrepreneurs must rely on other ways to obtain funds for their company's needs, such as a loan from the bank. However, new entrepreneurs are often unable to obtain a bank loan because they lack collateral, have a low FICO score or do not yet have an established business.

Until a startup is established, one option for obtaining capital is peer-to-peer lending, which typically costs more than a bank loan but is more affordable than what some loan firms charge. A more flexible option is revenue-based financing, which does not require hard assets. It may also be a good idea for new entrepreneurs to seek financing from online lenders, community banks or the SBA.

Compared to businesses that started around 2000, new businesses can function with far less capital due to infrastructure and cloud-based software as well as platforms that allow entrepreneurs to easily market and create their own apps, according to a computer expert. New entrepreneurs may also wish to keep their day job, so they are able to have residual income to self-fund when they need to make quick decisions and grow. They might also think of innovative ways to bring in side income, such as selling their services.

Those who want to fulfill their lifelong dream of starting a business might wish to begin by consulting a law firm for advice on matters pertaining to liability, taxes and licensing. An attorney could also explain the types of business entities and help entrepreneurs with filing articles of incorporation and generating bylaws and agreements.

Source: Entrepreneur, "4 New Ways to Self-Fund Your Startup", Dan Blacharski, February 24, 2017

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