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"Alternative Ways to Finance Your Business"

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A capital limitation is one of the most common reasons for people to hesitate in starting a business. You might get that good idea, but don't have the money to start it. Hence, the idea stays as only an idea, and most of the time, other people will execute it first to your regret.

Getting an investor is an obvious way to secure your capital. However, it can be a daunting task with no guarantees. Thus, we compile a list of alternative ways to finance your business, in no particular order.

1. Friends and Family Funds

Although it's obvious, most people hesitate to get funds from their friends and family for various reasons. Commonly, it's because of the fear that the relationships might be strained when the business fails.

However, borrowing from friends or family, or asking them to invest, is one of, if not the most risk-free way to finance your business.

Make sure you're borrowing only from those in a position to lend without risking their financial health, and make sure to cover all possible circumstances on paper.

2. Borrowing Money

If you are able to access a bank capital to finance your business, this might be a very reliable and secure option. If not, other lending services are also available, such as payday loans, peer-to-peer lending networks, and many others.

Many people consider borrowing money to fund a business is risky, but if you're confident that your business' profits can cover the lending interests, then this might be a good option to finance your project.

3. Crowdfunding

A relatively new option in this digital age, websites like “KickStarter” allows the 'crowd' to fund your business in exchange for a benefit such as free products, a certain royalty system, and many other methods.

If you think you have an exciting idea, this might be the best option for your business, where you can also promote your product/service in the process.

Many other platforms besides “KickStarter” are also available, some tied with a certain business niche that might fit your business. However, you will need to make a nice presentation of your business to launch a crowdfunding campaign. You can research past successful campaigns to get an idea.

4. Retirement Funds

If you have an investment in any form of retirement funds, you may consider to use it to finance your business. However, this thought might frighten a lot of people because of the risks involved.

In the U.S. and many other countries, you can legally invest your 401(k) funds to a business without any penalties.

For some, they might see this method as a way to invest your retirement funds in a business you can control, instead of investing in the stock market.

5. Combination

To diversify the risks, you might consider combining all above methods. For example, borrowing 20% of your needs from friends or family, 20% from retirement funds and the rest from crowdsourcing / crowdfunding.

This method can mitigate the risks involved in a riskier method such as unsecured loans.