There’s a lot to think about when launching a technology startup, with funding somewhere near the top of your priority list. This holds true no matter how much money you need to get your company up and running.
As stressful as it may be to chase down funding, there’s a silver lining. There’s no shortage of places you can turn. And with that, you should be able to find what you’re looking for within a reasonable amount of time.
Here are five of the best and most common types of funding for a technology startup.
1) Venture capital
Seeking venture capital is difficult. Securing venture capital is even more challenging. However, it’s one of the best places to start your search for funding.
There are both pros and cons of venture capital. On the plus side, you can gain access to a large amount of cash as well as the guidance of experienced advisors. On the downside, it’s important to note that you’ll give up equity in your startup if you go down this path.
2) Business loan
For many people, this is the best place to start. A business loan provides clarity in regard to how much you borrow, how long you have to repay the money, and how long it will take.
Before applying for a business loan, answer questions such as:
- How much money is enough money? How much is too much?
- How do you plan on using the funds?
- What interest rate can you secure?
- What term is best for your current situation?
The more of these questions you answer, the more likely it is that you’ll apply for a business loan that suits your financial circumstances.
3) Personal loan
A personal loan is exactly what it sounds like. You seek a loan from the bank based on your credit history, credit score, and financial circumstances. Although you’re taking on the loan as an individual, not a business, you can still use the funds for your company.
For example, if you’re in the market for new technology, such as an exoskeleton, for a competitive advantage, a personal loan is often best. You can apply today, receive an approval within 24 to 48 hours, and obtain funding almost immediately. From there, the money is wired to your bank account and you can use it however you best see fit.
4) Credit card
You can use either a business credit card or a personal credit card to fund your technology startup. Either option works. You may even want to combine the two of them depending on how much money you need.
The nice thing about a credit card is that there are hundreds of offers to choose from. You can continue your search until you find the one that’s perfect for you. This is easier today than ever before with the ability to search and compare offers online.
Also, with a rewards credit card, you earn points or cash back for every dollar you spend. You can then use this to push your business forward.
5) Friends and/or family
Some people consider this a last resort, while others move in this direction the second they realize that they want to start a company.
The primary benefit of this type of loan is speed. There’s no formal application and approval process. If someone agrees, you can have the money in hand almost on the spot.
The biggest disadvantage is that you risk your relationship if something goes wrong and you’re unable to repay the money when you promised to do so. If you have any concerns about that happening, it’s often best to avoid this type of loan.
Launching a technology startup is one of the most exciting things you can do from a business perspective. Don’t let a lack of funding stop you from realizing your dream. Instead, consider all the options above and then make a final decision as to which one is best for you and your vision for the future.
Do you have any experience funding a startup with one or more of the methods above? What are your thoughts on the experience? What would you change if you had to do it again?