How to start and fund your new startup without a bank

02 May, 2019

On Behalf of Mack & Mack Attorneys | business law

Many people in South Carolina believe starting and funding a startup is easy. Sometimes this is true. However, for the entrepreneur without strong industry connections, the path may be a more difficult one. It may also prove longer than it might be for someone else.

Forbes differentiates between a startup and a small business. The media company defines a small business as a for-profit organization that is independently owned and does not hold a dominant position in the market. In contrast, startups are temporary businesses that meet at-the-time demands for scalability and repeatability that traditional businesses do not.

Not everyone agrees with this definition of startups, but all might agree that one of the greatest challenges facing startups and small businesses is funding. The first idea Forbes puts forward for obtaining funding is pursuing grants. The process is often long and drawn out with plenty of hoops to jump through, but the opportunity to get started without debt or with lower debt amounts cannot be ignored.

Another debt-free option that has gained increasing popularity in the past few years is crowdfunding. However, depending on the platform chosen, entrepreneurs may have to meet various criteria before gaining access to the money. For instance, some companies only allow entrepreneurs to touch the funds if they actually meet their goal. Be sure to check the guidelines before choosing a platform.

In instances where an entrepreneur’s family and friends have deep pockets, or they have a lot of family and friends who would support their idea, it is worth tapping into this network. Not only can they provide entrepreneurs with funding, but they may even be the first workers on site until the company can hire a team of its own.

Entrepreneurs also often hope for an angel investor, but this may come at the cost of full control of one’s business. The angel investor may be able to dictate what changes or developments should take place before dispersing funds. There may also be disagreements on what funding covers. While this is not always the case, the risk of losing control is worth keeping in mind.

There are many options for funding a startup without ever walking into a bank. However, many of these have their own set of red tape. Take a good look at the restrictions and guidelines before settling on any fundraising activities.

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