“S/he was born on third base and acts like s/he hit a triple.”
You’ve probably heard this cutting phrase deployed against at least one member of the rich-and-famous set before. In America’s meritocratic culture, the implication is devastating: “You’re only on TV/in the news because of who your mommy/daddy/agent was.”
In the business world, “born on third base” isn’t such a bad thing. Since they have access to ample capital reserves, well-born entrepreneurs don’t have to rush out and seek funding until much later in the startup game, often after they’ve cobbled together some regular customers and put together the semblance of a recurring revenue stream.
But most early entrepreneurs can’t draw on a golden slush fund. Mommy, daddy, uncle and/or auntie aren’t present, don’t care, or don’t have the resources to help anyway.
If you’re starting your business journey on first base, try these simple, scrappy funding ideas:
Run a Crowdfunding Campaign
Crowdfunding is a great way to raise lots of money through lots of small donations from lots of different people. Everything happens online, and most crowdfunding platforms handle behind-the-scenes paperwork and compliance, so the process is streamlined and easy to scale. To stand out, most crowdfunding campaigns offer incentives to donors who clear certain contribution thresholds — first-run products, branded merchandise, meet-and-greets with founders. There’s no practical limit to how much you can raise through crowdfunding.
Enter a Startup or Product Competition
Many government agencies, universities and private philanthropies run startup or product competitions that offer prizes to entrepreneurs and inventors who make it through a rigorous, “Shark Tank”-like demo/pitch competition. Prizes vary in size: some high-profile competitions offer six-figure grand prizes (not counting seminal, “longshot” competitions like the $10 million X Prize), while smaller-scale events offer low five-figure grand prizes. Runners-up typically get less, and everyone gets the chance to work with experienced mentors and judges.
Apply for a Small Business Loan
Traditional banks typically don’t take chances on startups without proven revenues or customer bases. The exception to this increasingly steadfast rule: Small Business Administration loans, which are privately issued loans backed in part by the federal Small Business Administration. SBA loan applicants usually need collateral, so this approach definitely isn’t for very early-stage businesses. But the SBA does offer a pretty wide range of loan programs, it doesn’t hurt to explore your options.
Sell Your Structured Settlement Payments
If you’re receiving regular payments from a structured insurance settlement, why not bundle them together into a more potent source of business capital? It’s surprisingly easy to sell structured insurance settlement payments at competitive rates of return. The best part: you don’t have to wait years for the payout.
Use Your Personal Assets As Collateral
If you’re not up for running a crowdfunding campaign and don’t have a structured settlement to sell, the easiest solution might simply be to determine which of your personal assets actually have value — and how much. For instance, if you have substantial equity in your home, you’ll likely be able to take out a loan or open a line of credit against it. Home equity lines of credit are among the cheapest and largest credit facilities available to middle-class business owners, and most lenders don’t require stellar credit.
Are you starting a business from the ground up? How are you funding it?