How and where to start financing your startup project

One of the biggest problems when it comes to starting a business is surely a matter of money. How to get started with financial resources and start?

You might think it’s crazy to think about starting any deal, if you do not have the money you need to invest. But if you have a good idea and a super-designed business plan that you are sure to succeed, you should not give up on it. There are ways to get to the financial means.

In fact, this step is just the first obstacle you will encounter in business. Challenges will be much anyway. Prove yourself to be able to fight them from the very beginning. If you overcome it, then you are quite ready to continue with your idea.

Fortunately, there are several ways to start a startup with several sources of money. Some will be repaid with interest (for example, credits), some will be given to the account of the share in the company (similarly, there are big joint stock companies that give as a reward participation in profit, the so-called dividend) and there are some ways to get free and non-refundable money.

If your startup idea is ready, then pay attention. Here are some tricks how and where to start financing your startup project.

Starting any business is not an easy task, if you have an idea, it’s mostly lacking in money. Starting a business without your own capital is possible. There are many ways to get the necessary funds, but one of the most interesting is Crowdfunding.

Crowdfunding represents a specific form of fundraising for starting or developing a project. Unlike large investors, crowdfunding is based on the contributions of individuals, small and large companies, as well as all other interested individuals and legal entities who want to contribute to project.

Nowadays, ideas are more valuable than money. A good idea in the short run can make someone a billionaire, or a successful innovator, perhaps a socially responsible model. However, reaching financial resources for its realisation is not always that simple. Crowdfunding as a form of group financing can help you in this. Promoting ideas from any area, through a well-conceived campaign through certain Internet platforms, offers the finest possibilities for acquiring the desired start-up capital.

Crowdfunding is based on the financial contributions of tens, hundreds, or thousands of different people who will give you small amounts to help you (the amounts can literally go from $ 5 to the top). It’s very important to think of a good reason why these people would give you money.

The Crowdfunding model on the Internet evolved in several directions:

n Lending funds for the realisation of projects. A typical example of this service is Kiva.

n The most famous example of this service is Kickstarter. At such platforms, crowdfunding entrepreneurs commonly set a funding target for their project which serves as a threshold. The project gets funded only if the target is reached within a specified amount of time.

n Project financing by combining the sale of perks and donations. The best known example of this service is Indiegogo. Indiegogo has helped thousands of companies raise over a billion dollars in perks campaigns.

There are a multitude of crowdfunding fundraising platforms, but certainly two are ranked as the most interesting and popular platforms in terms of investment because they do not require you to give a stake in your company/project to get funds, these are Kickstarter and Indiegogo.

P2P lending is another Internet option to get money for your startup. Money providers are not banks, but private individuals (hence the P2P name, or peer to peer, which would mean a person-person). You do not have to know these people, nor should they know you. Peer-to-peer lending removes the middleman from the process, but it also involves more time, effort and risk.

In return, you do not give them a share in the company, but you repay the money with interest, as would be the case if your bank approved the loan within the appropriate time limit. You need to leave your application on the platform, and then the creditors themselves assess whether they will give you money. In simple terms, P2P lending happens when an online platform matches lenders with people or companies looking to borrow money. Such a platform is, for example, Prosper.

Peer-to-peer loans represent a new way of financing, created in 2005 in the Britain. In contrast to classic banking, the peer-to-peer lending investors are looking for an opportunity to invest and compete for this opportunity by offering what less interest rates through the auction. In this way, a lower interest rate for debtors is achieved.

The four best P2P lending platforms including their default rates, interest rates, and other important metrics are Lending Club, Prosper, Upstart and Funding Circle.

STEFANO VIRGILLI

stefano@virgilli.com