Research

Six sources of funds to tap for your startup venture

Starting a business venture is never an easy process, says Sidnee Peck, director for the Center for Entrepreneurship. Peck elaborates on the key components needed to get funding for your business venture.

2014-04-14

By Sidnee Peck Director, Center for Entrepreneurship Question: I have been working on a new business idea, and I need funding. Where can I get started? Answer: This depends on your industry and the amount of money you need. Start by demonstrating your commitment to your new venture by putting some of your own money into the business to achieve a milestone or two, and then map out your next milestones and what it will cost to get to each one. Funding gets complicated quickly, but here's a list of other possible funding sources to help get you started: Friends and family: Your loved ones can be a direct and often quick way to raise initial seed money, but be careful to solicit only from those who can afford to lose it. Also, always prepare a contract and be transparent about the high degree of risk involved. In addition, there are rules about how much you can raise from non-accredited investors, so check with the U.S. Securities and Exchange Commission website at sec.gov. Microloans: These loans combine the lending power of multiple small lenders to let you access funds for new or small businesses. Many organizations exist in this space, such as the global non-profit Accion. Crowdfunding: These online campaigns allow you to gain donations or investments from "the crowd" of your networks and possibly some strangers. The process takes more time than most assume, and a great video is essential. Examples of crowdfunding sites are Kickstarter, Indiegogo and Crowdfunder. Government grants: The federal government's Small Business Innovation Research group funds grants for businesses performing research valuable to the government. Tons of terms and conditions and grant writing are not for the faint of heart, but grant awards are also not tied to equity or debt. Visit sbir.gov for more information and to sign up for alerts. Small Business Administration: The SBA empowers banks to make riskier lending decisions on new and small businesses because of government guarantees. Many banks offer SBA loans, and a quick online search can help you identify some near you. Angel investors: Accredited individuals or groups may invest their own money in an entrepreneur. You can search for local angel groups, such as the Arizona Technology Investor Forum in the Phoenix area, or you can access angels nationwide on websites such as AngelList. Angels usually require revenue or other significant traction to invest. First published in The Arizona Republic, April 14, 2014.  

Entrepreneurship Management