Finding start-up money can be the most challenging aspect of starting a business. And when you’re a minority, this step in the process can be even harder. A recent study by three top universities revealed that African-Americans and Hispanics face unnecessary obstacles when applying for a small business loan, or when getting resources to start their small business. Even further, minority entrepreneurs often have to use their own funds to start a business. Luckily, you can raise capital without ever having to step foot in a bank. Here are five other ways to get start-up costs when you want to avoid getting a loan.
Start an Inexpensive Business – On average, it takes $30,000 to start a business. While this number is normal, there are several businesses you can start with just a fraction of that amount. If start-up costs will be your primary challenge, then opt for a business that does not require much money to start. Forbes lays out a list of businesses that require less than $5000 to get up and running, including offering child care or public relations services. Lower start-up costs will be easier and quicker to attain, especially when you’re going at it alone. Also, now that you will only need a few thousand dollars, it will be easier to gather money from family, friends or supporters.
Crowdfund – Entrepreneurs are regularly turning to online crowdfunding when getting a loan is not enough or an option. With crowdfunding, you can receive monetary support for your new business from family, friends and complete strangers. People from all over the world can contribute to your cause (in this case, your business) and help get it off the ground. There are several online crowdfunding websites; some are designed for specific purposes. Freudon, for example, is a crowdfunding platform that only accepts campaigns from millennial entrepreneurs. Other popular platforms include KickStarter, GoFundMe and Indiegogo, which have all been successful in bringing business and creative projects to life.
Involve Family and Friends – In addition to online crowdfunding, get your immediate family and friends involved. Write a detailed business plan and share your idea with loved ones. Then, ask them to contribute to your new business by donating or giving you a loan. Be professional and approach your loved ones in the same manner you would a bank. Be open about how much money you’ll need, how you plan to spend it, and when you’ll repay the money, if it’s a loan. Even $10 from ten people close to you can help offset start-up costs for licenses, patents and other small initial costs.
Get a Second Job – A second income, even if it’s from part-time work, can add up quickly and go towards your new business venture. Several entrepreneurs have used income from additional jobs to either start or add to their business start-up fund. Just 5-10 additional hours per week over the course of a few months can add up to thousands of dollars.
Network – Business networking is a great way to meet like-minded entrepreneurs who may not only back your idea, but fund it. Joining a group on Meetup or another local group will connect you with people who might be interested in becoming partners. Attending local business events, such as those listed on Eventbrite, is another way to network with other supportive entrepreneurs. Several large corporations are the result of the founders meeting through networking. Your co-founder could be at one of these events.