Friends and Family Funding
You, your family and friends might be the financing behind your business. Think of personal savings, a home equity loan, and borrowing against your insurance policy, all as potential starting points. The following articles provide some tips when using personal resources to fund your business.
Browse 6 Tips for Borrowing Start-Up Funds from Friends or Family for the protocol when you are considering them for financing. Approaching Friends and Family for Funding from Entreprenuer.com provides additional insight when this might be your primary option.
Even with all the financial and emotional considerations that go into determining if friends and family will provide financial assistance, this option is not uncommon. According to the Kauffman Firm Survey one-third of young entrepreneurs do not use capital injections, but rely on owner investment or nonbank sources of funds- with the more frequently used source of start-up dollars coming from owners’ and relatives’ savings.
P2P or Peer-to-Peer Lending, where you share your idea online with others in hopes they will invest, is emerging on sites such as Prosper or Lending Club. In many cases, Peer to peer lending is not yet available in Iowa. Be sure to read the terms and conditions of these sites very carefully before submitting your business plan.
Crowdfunding is emerging as another start up financing option with the passage of the 2012 JOBS Act. Previously, small businesses were limited to seeking investment from Securities Exchange Commission (SEC) accredited investors only; now non-accredited investors (meaning you and I) can invest in a startup to the tune of up to $1 million a year. Current crowdfunding websites include: KickStarter, Wefunder, Crowdfunder and RockthePost. Most crowdfunding opportunities are not loans and, as such, do not involve traditional forms of repayment and interest. Instead, borrowers offer a form of payback or reward to encourage people to make the investment.