When mergers and acquisitions lawyer Nicole Valentine launched her New York City-based Synergy Business Development company last year, she turned to none other than herself for $50,000 in seed money to finance her start-up.
However, not everyone is in a position to finance his or her own business, which is why Valentine’s Synergy Business developed Winly, an app that helps start-up CEOs, strategy teams at Fortune 500 Companies, and social entrepreneurs manage and track prospective opportunities.
“I wanted to help businesses to grow, so I used my legal insights to create an app that enhances the business planning and strategy experience,” she told NewsOne. The app is available on IOS Apple iPad and iPhone.
Have an idea for a start-up? Valentine provides three creative tips to help you finance your dreams:
Crowdfund your way to the top
There are countless stories about people raising thousands or millions of dollars online through crowdfunding, which involves raising small amounts of money from a large number of individuals, usually via the Internet. People use collaborative financing to fund businesses, vacations, and medical expenses. This year, the global crowdfunding industry is expected to raise up to $34.4 billion, up from $16.2 billion in 2014, according to the Crowdfunding Industry Report by Massolution.
Four popular sites are:
Kickstarter, where creative projects raise donation-based funding (meaning contributors do not become investors or shareholders).
Indiegogo, which approves donation-based fundraising campaigns for almost everything, including hobbies, businesses, and tuition.
Crowdfunder.com, which allows entrepreneurs to raise money from investors.
GoFundMe, which focuses on raising money for personal projects such as life events (think honeymoon fund) or illnesses that require a lot of medical bills.
Platforms are either “all-or-nothing” or “keep what you raise.” For example, Kickstarter, an “all-or-nothing” platform, allows creators to select the amount of money they want to raise, but they have to meet the target in order to receive the money (pledgers aren’t charged until the goal is met). Under the “keep what you raise” model, the project creator picks the donation size, but also gets to keep what they raise – even if they do not reach the funding goal. Many sites will give you a choice between the two models.
Obtain a line of credit from a financial institution
Applying for a line of credit from a bank or a credit union is a good option if you have a strong credit score. Use creditkarma.com and creditsesame.com to check out your score and credit history for free.
Be sure to have a business plan to present to lenders, who will want to make sure your company is a good investment. There are two types of lines of credit: traditional and nontraditional. The traditional option requires documentation such as collateral, personal tax returns, business tax returns, bank account information, and business registration documents. Nontraditional lines of credit require less paperwork and have lower borrowing limits because they do not require collateral.
Apply for an old-fashioned grant
The main advantage of obtaining a grant to finance your startup is that it’s free of charge. The trick is finding and obtaining grants, which can be extremely difficult. There are many federal grants available based on the theme of your business and demographics. Some are designed for minority business owners, women, and single mothers. Most applications require extensive proposals that call for details about every facet of your organization, so get ready to pull up your shirtsleeves.
Most regions of the U.S. have economic development corporations with large pools of capital. “They make it their mission to fund businesses and provide the fuel for expansion,” Valentine says. “They also provide counseling to make sure entrepreneurs have the components to really stand up as a business.”
Financing your startup does not have to be complicated, Valentine said. “There are lots of creative financing options out there for entrepreneurs, they just have to know where to look.”
In addition to Valentine’s tips, we’d also encourage you to secure an interest rate that works for you. Some financial institutions, like Wells Fargo (the sponsor of this series of financial advice), offer special interest-rate discounts on select new loans and lines of credit, if you already have a Wells Fargo checking account or other preexisting banking relationship. Meet with your banker to understand exactly what may be available to you.
PHOTO CREDIT: Getty