Business

How Can Startups Generate Money?

How Can Startups Generate Money?

When starting a company, businesses tend to be low on resources, both human and financial capital. This can make it challenging to get the business off the ground. However, there are different ways that startups can generate money and help take their business to the next level.

Use Personal Savings

If you are an entrepreneur or even if you are just starting a side hustle to make a little extra money, using personal savings to get your business started is always an option. It could be that you have a nice lump sum saved up that could be the initial investment in getting your business started. However, there is always a risk when using personal finances in your business. Should the business fail, or take longer than expected to generate profits, you will lose your personal savings and leave yourself without emergency funds.

Borrow from Friends and Family

Friends and family can help you make your business dreams a reality by investing in your ideas. They may want to support you in any way that they can and you might be able to get together a sum of money from loved ones. Unlike investors or banks, your family and friends are more likely to believe in your dreams without needing evidence of revenue or business progression. Thus they could be the ideal initial investors in your business. 

That said, if you choose to borrow from friends and family, you should treat this as you would with any official loan, making sure to seek legal advice and lay out clear loan terms. Borrowing money and not taking your payment obligations seriously is an easy way to ruin family relationships and friendships so you should always proceed with caution.

Take out a Small Business Loan

There are plenty of banks or online lenders who specialise in lending money to small businesses and the UK Government even have a startup loan scheme for eligible businesses. 

With certain banks, it can be difficult to qualify for a loan as they may require a strict credit check or an extensive financial history of the company- this is obviously more difficult if your company is new.

However, there are plenty of alternative lending companies and online loan providers who could help get you the funding that you need. As many of these companies specialise in small business loans, they are a good way to get you the funding you need and match you with a lender who understands your business priorities. 

Samuel Davies of Kallyss.com comments: “Small business loans can in some cases be a great way to access the capital you need to get a business off the ground. Sometimes a business will need that little extra injection of cash to get it up and running and on the path to profitability and prosperity. Finding the right loan or financial product that helps a business grow and thrive can be transformational for any startup or business.”

As with any borrowing agreement, make sure you know who you are borrowing from before signing any contracts and always do your research first.

Crowdfunding

Got an idea that can appeal to the masses? If your business proposal is a crowd-pleaser and you’re not afraid to do a huge social media push, crowdfunding could be a great idea to get your idea up and running. Crowdfunding involves promoting your business idea and seeking funding to finance your project or business. It allows access to a large volume of people via online platforms. Anyone interested in the idea can donate money and fund your cause.

With many different companies trying to raise money this way, it can be difficult to stand out from the crowd. In order to do crowdfunding successfully, you’ll not only need a great business idea that generates lots of interest, but the campaign needs to be able to capture the attention of many.

Small Business Grants

There are many organisations who look to support small businesses and who offer grants targeted at specific entrepreneurs. For example, grants might be available for female-led companies or companies run by minority groups. Do your research to see what might be available nationally or in your local area. Grants, unlike loans, do not need to be paid back so it is a great way to put money behind your business.

However, the criteria for grants are typically far more specific than for loans making it much harder to qualify. Always make sure to check the small print before applying, taking care to see if you need to pay the money back further down the line or adhere to certain conditions.