Wednesday, June 12, 2019

“5 Ways to Start a Business with Cheap or Free Money - Entrepreneur” plus 2 more

“5 Ways to Start a Business with Cheap or Free Money - Entrepreneur” plus 2 more


5 Ways to Start a Business with Cheap or Free Money - Entrepreneur

Posted: 11 Jun 2019 08:39 AM PDT

Crowdfunding, universities and government programs can be attractive options for people who want to start a business without giving up too much equity.

8 min read

Opinions expressed by Entrepreneur contributors are their own.

You've got the next billion-dollar idea. Or million dollar, or whatever it is. The point is it's good, and you want to prove its value. This is the stage where most startups die -- which is to say before they even get started. Because the most daunting obstacle to seeding the next big idea is capital.

Most first-time entrepreneurs have heard of venture capitalist firms and angel investors. That's how Facebook got started, right? So why shouldn't it be you? The truth is it's extremely difficult and rare for first timers to receive funding this way. In fact, by some estimates, less than one percent of startups are funded by angel investors and a fraction of one percent by VCs.

Problems finding funding to start a business

When looking for outside funding, many entrepreneurs look to friends and family. But do you really have friends and family that are able and willing to shell out $50,000, $100,000 or more to see if your idea is worthwhile? And getting a loan from the bank is a tedious prospect where you may have to put your house or other personal assets at risk. Not to mention there's the other problem even if you do get funding: giving up too much of your company too early.  You see a big check, give up 50 percent of the company, and end up regretting it for the rest of your life.

Related: The Complete, 12-Step Guide to Starting a Business

These are problems that are unfortunately preventing many good, innovative ideas from ever sprouting beyond the back of a napkin. But what many entrepreneurs don't know, especially if it's their first time around, is that there is capital to be had without any strings attached. Here are five ways you can seed your company on the cheap, or even for free:

1. Government grants

Did you know that you can find grant money to fund your startup on the federal, state, regional and even city government level? And they won't even ask for equity. While what's offered will vary by geographic location, investing in startups has become an emerging model of how government is enacting economic development. Invest in the next unicorn in the region, and it will create jobs and attract talent to the area.

For example, manufacturing is important to the state of Ohio, wich is why it established the Advanced Manufacturing Program, offering grants of up to $500,000 to promote innovation in manufacturing. Louisiana, a state with a major international port and shipping center, provides grants to small businesses to help increase exports.

These types of focused grants exist in individual states and across industrial sectors, and at both the state and Federal levels. The National Science Foundation, for example, funds about 11,000 proposals a year spanning everything from biosciences to climate-related ventures.

And Louisiana Economic Development's STEP export program offers reimbursement for small businesses that are either new to exporting or primed for market expansion. Eligible businesses can receive over $6,000 for things like exhibition booth fees, travel, and even business-related meals.

Related: How to Start a Business With (Almost) No Money

Finally, Connecticut's Manufacturing Innovation Fund Voucher Program offers grants of up to $50,000 to help pay for new technology, expertise, and prototype development.

However much money you need, and whichever sector you're in, there's likely a grant out there that could provide seed money to move your idea forward. And while there will sometimes be certain stipulations you'll have to meet (for example, extensive reporting and forms to submit), you'll never have to give up equity or pay back the grant.

2. Crowdfunding

You've probably heard of Kickstarter or GoFundMe, but maybe they just seemed like cute platforms for artists. Turns out, Kickstarter has seen over $4.3 billion in pledges. If you need seed money, let's say $20,000 to develop your app, crowdsourcing could be the answer. In exchange, you offer products or services, but you don't have to give up equity, you don't have to pay interest and you've already developed a community of potential customers.

Some crowdfunding platforms have taken the step of specifically funding startups, while others are simply open to raising money for any purpose. Fundable, founded by former entrepreneurs and focused on raising crowdsourced capital for startups, generated over $80 million in funding commitments in just its first year. And Indiegogo, another platform with entrepreneurs specifically in mind, has raised over $1 billion in funding for over 650,000 projects.

Hey, if crowdfunding was good enough for Oculus, the virtual reality headset maker that was eventually acquired by Facebook, it might work for you, too.

3. Accelerators

While you might think that accelerators only accept you if you give them equity, that's not actually true. There are many programs that offer the same intensive coaching and resources that equity-play accelerators do, but minus the whole equity part.

The reSET Impact Accelerator, out of Hartford, Conn., offers a 4-month, intensive program designed to equip entrepreneurs with the skills and resources needed to scale their startups. There is no cost, and no equity is taken. The only catch is you have to live in Hartford.

Related: Jeff Bezos Shares His Best Advice for Anyone Starting a Business

MassChallenge out of Boston, is a zero-equity, zero-cost accelerator for early-stage companies across multiple sectors. And not only does it cost participants nothing, but MassChallenge also hands out $1 million in cash prizes. Alumni of the program have been able to verify their products, learn critical skills, build important networks, and have gone on to raise over $2.5 billion in funding.

Take a look in your own backyard and you might be surprised at the programs out there that will help you take your idea to proof of concept at little to no cost.

4. Pitch competitions

Since Shark Tank debuted, pitch competitions have sprung up throughout the country with different prize opportunities. And unlike on Shark Tank, many of them don't result with entrepreneurs having to give up equity or paying back the so-called Mr. Wonderful a bunch of interest. Take the Urban Future Prize Competition out of New York City. Two winners receive a $50,000 cash prize each year, plus automatic entry into an incubator program. While this competition is focused on cleantech, there's likely one in your sector, too, with prizes ranging from $10,000 up to $1 million in some cases.

On the other side of the country, San Diego Startup Week offers multiple pitch competitions for companies at an idea or seed stages, with cash prizes starting at $1,000. San Diego's premier startup event also offers pitch workshops so entrepreneurs can hone their chops before taking the stage. Entrepreneur magazine's Elevator Pitch show offers a wide variety of deal structures for winning pitches.

Related: 6 Tips for Starting a Business That's an Instant Hit With Locals

5. Universities

Universities offer grants and awards for students, faculty, and alumni, as well as offer up resources that startups could otherwise only dream of. It doesn't matter if you're a freshman or a tenured professor if you have a connection to a university that could be your ticket to raising the capital you need without the usual drawbacks.

Life sciences have an extremely expensive barrier to entry for startups, but universities offer the research facilities and can match entrepreneurs with researchers to push their ideas forward. The University of South Carolina even offers its own pitch competition, The Proving Ground, where students and alumni can receive up to $17,500 in cash to fund their idea.

In fact, it seems almost every school in the country these days has its own pitch competition -- from big names like Harvard and MIT to state schools like the University of Georgia.

But universities are doing more than just giving out prizes for pitches -- many of them offer full-fledged startup support. The University of Virginia's iLab, for example, provides direct grants, mentorship, an incubator, and even co-working spaces. And Yale University's Office of Cooperative Research has given 18 startups grants of $100,000 each to bridge the gap from early-stage research to the creation of successful biomedical products (which enabled them to leverage an additional $103 million from other funding sources).

Entrepreneurs aren't wired to think about the government seeding their startup, or to consider receiving no-strings-attached money. Their first instinct is to seek out VCs or angel investors, and when that doesn't work, to take on debt with big interest payments attached. These economic development tools can be the key to bringing to life that idea you've been sitting on for a while. After all, with free money, what is there to lose?

Startup Money for Small Business: 5 Places to Find Funding - Point of Sale News (tm)

Posted: 11 Jun 2019 06:03 AM PDT

PointofSale.com Owner hanging opening soon sign Startup Money for Small Business

In business, you need money to make money. However, when you're first starting, it's not always easy to find an eager hand willing to provide the funding you need to get your company off the ground.

Nonetheless, according to the U.S. Small Business Administration (SBA), there are 28.8 million small businesses in the United States, so while it may not be easy to find startup money for a small business, it's certainly not impossible — and you've got some pretty good company.

There are plenty of small business financing options out there, and we're going to look at several in this post. Are you ready to dive in?

How Much Money Do You Need to Start Your Business?

Before you start asking for money to fund for your startup business, you'll need to know exactly how much you'll need. Calculate the various startup costs by referring to your business plan. You'll need to tell financing organizations exactly how you intend to use the money they're loaning out — and how you plan on paying it back.

Depending on what type of business you plan on opening, you'll need anywhere from a few thousand dollars to upwards of a six digit figure. Be that as it may, you'll be happy to know that 58 percent of small businesses get started with $25,000 or less. While this is still a good chunk of change, it's a manageable number and doesn't put you too far in the red before you even open for business.

1. Small Business Loans

Just like any other type of traditional loan, taking out a small business loan means that you'll have to pay it all back — plus interest. Although this puts you on the hook to pay back the cash, it also means you keep a full stake in your business.

There's a multitude of lenders in the small business loan market, each claiming they're the best fit for your business. Of course, not every loan is right for you, so you'll want to do as much research as possible to find the one that is truly right for you. To help you get started, let's take a look at four specific types of small business loans you'll want to consider.

However, before you approach any of these lenders, you'll want to have your business plan, credit score, business registrations, and any other documentation at the ready. The qualifiers that will help you stand out as a worthy candidate are a high credit score, assets such as your home or investments, and the presence of an existing customer base that knows your brand. Being able to show financial projections and a roadmap of how you came up with that figure is also essential.

Traditional Bank Loans

National and community banks alike provide loans to highly qualified startups, with probably the lowest interest rates you'll find. Depending on the economy, you can expect bank loans to have an interest rate of 4 to 10 percent, with long-term monthly payments in very manageable chunks.

You save a lot of money going with a traditional bank loan compared to other loans, but the catch is that it's hard for most startups to qualify. You have to have an excellent personal credit score (above 700), collateral that you can pledge against the business, possibly a co-signer who is willing to do the same, and some experience in the industry you're pursuing, just to name a few.

Alternative Lenders

If you're having trouble qualifying for a bank loan, there are online lenders ready to serve you — but it will probably cost more. While alternate lenders have lower qualifying standards, they offset that risk by imposing sky-high interest rates.

Tread with caution when it comes to alternate lenders because you can get into some major debt if your business can't cover the cost of paying back the loan. It may be a little too risky for companies that aren't yet financially stable, which is the case for most startups. Nonetheless, if your business can get off to a lucrative start with the help of the loan, it could be a great catalyst.

SBA Loans

The Small Business Administration (SBA) offers small businesses guarantee programs for loans that are made by qualifying banks, credit unions, and nonprofit lenders. These guarantee programs mean that the SBA guarantees up to 85 percent of the loan, which is an offer that's hard to refuse.

  • The Standard 7(a) is the SBA's flagship program with the maximum loan amount of $5 million and best used for working capital.
  • The Small 7(a) is the mini version of the Standard 7(a) loan. The maximum loan amount is $350,000 and typically faster to fund than the standard version.
  • Microloans are for smaller businesses that need up to $50,000 for working capital.
  • The CDC/504 loan program is for business owners looking to build or buy owner-occupied commercial real estate.
  • The Veteran's Advantage is an SBA loan that is only available to veterans for up to $350,000.

Depending on your specific needs and qualifications, all of the loans mentioned above are possible solutions for your small business funding needs.

PointofSale Couple closing deal with broker Startup Money for Small Business

2. Small Business Grants

As opposed to loans, you have to pay back; you do not have to repay business grants. However, that's not to say business grants are a zero-risk endeavor. Since government agencies are the biggest distributors of grants, it's typically a very time-consuming and challenging application process. If you're looking for fast cash, applying for a grant is probably not the way to go.

However, if you do decide to apply for business grants, start by approaching organizations that offer business grants designated for a group that applies to your demographic or nature of your business. For instance, there are grants awarded specifically to female business owners, eco-friendly businesses, or socially conscious businesses.

3. Crowdfunding

Thanks to technology, crowdfunding is becoming an ideal funding option for startups that already have an audience they can tap into. Crowdfunding is a way to solicit funds from the public via an online campaign, and typically, rewards are given to individuals in exchange for their donation. Often those rewards are in the form of early access to products or free brand merchandise.

If you don't have much brand awareness yet, crowdfunding probably won't bring in the cash you need. However, with the power of social media, there are plenty of opportunities to grow your fan base on social networks like YouTube, Twitter, or Facebook. Plus, you don't need an outstanding credit score or an endless list of other qualifiers to use a crowdfunding platform.

See Also: Point of Sale Providers Can Help Restaurant Owners Access Capital

4. Angel Investors

If you're having trouble getting a loan, or your business is not yet popular enough for crowdfunding, getting angel investors on board is a possible alternative. However, the catch is that you'll give up some of your business' equity in exchange for the cash.

Although you may relinquish some control of your business to the investors, you stand to gain from their connections in the business world and the advice they can offer from previous experience.

5. Personal Financing

If you don't want to give out equity in your business, but you can't seem to qualify for a loan or win a grant, you still have the option of personal financing. There are a few different ways to go about this, so let's take a look at a few options.

Friends and Family

If you can get a personal loan from a friend or family member to start your business, go for it. It's a fairly common way for new startups to get funding. Also, if you have to pay interest, chances are it'll be a lot less than what you'll pay a professional lender.

Home Equity Loan

A home equity business loan is like a lien or second mortgage on your house that you can leverage to finance your business. These loans typically have 5 – 10 year repayment terms, so you pay them off in manageable chunks. However, you do end up paying a lot of money in interest over that term, and if your home's value declines, you could be forced to refinance, and if you default, you can face foreclosure — losing your business and your home.

Your Savings Account

If you've been a savvy saver your whole life, your savings are another financing option. You're not putting anyone else's money at risk, you're not giving up equity in your business, and think of all the money you're saving by not paying interest on a traditional loan.

Personal Credit Cards

Although personal credit cards won't offer large lump sums of financing, they could be a great way to kick things off and serve as a revolving source of funding. Nonetheless, keep in mind credit cards usually carry high interest rates, so proceed with caution.

Your Retirement or 401K Plan

Did you know your 401k could finance your business? There are a couple of ways to go about using your 401k for startup funds.

For starters, you can borrow up to $50,000 or half or your vested 401K plan — whichever is lower. Generally, you'll have to pay off this loan within five years and pay an interest rate between 4 -8 percent. However, because you're borrowing against your retirement, you're paying yourself back — plus the interest.

Another option is to cash out or liquidate your 401k completely. This is a good option if you're near retirement age, but if you're under 59, you'll have to pay a penalty fee (around 10 percent) of what you cashed out.

Final Words

Startup money for a small business is always risky from a lenders perspective, but the right financing option can mean the difference between sinking or swimming in the early years of business. You might consider working with a startup consultant to get expert help in finding funding opportunities and applying for them. While this is yet another cost in the early stages, it can pay off. Please educate yourself about every opportunity as much as possible before going for it, and of course, always be sure to read the fine print before you commit to any loan or funding plan.

Disclaimer: The intent of this article is to provide an informational resource. It is not intended to serve as professional financial advice. You should always consult a financial professional or accountant when making any financial decisions for your business.

About the Author

Nicole Sabo

As part of the Editorial team at PointofSale.com, Nicole Sabo brings together relevant content and resources to create a powerful informational platform for site visitors. Nicole graduated Cum Laude from Bloomsburg University of Pennsylvania in 2015 with a B.S.B.A. in Marketing and Management and has experience in the retail and hospitality industries.

[Startup Bharat] How edtech startups are bridging the gaps in education in Tier II and III India - YourStory

Posted: 11 Jun 2019 04:49 PM PDT

"Any kind of growth requires hunger. And rural India has a lot of hunger for growth," says Dinesh Badagandi, Founder of TZP (TareZameenPar).

Dinesh is a serial entrepreneur who developed a mobile planetarium to create "excitement and curiosity among students of Karnataka's villages". He is one of several entrepreneurs working hard to bridge the gap between rural and urban students at various levels with the help of technology.

Indian metro cities are already familiar with edtech startups with the likes of UpGrad and BYJU's. According to a report by KPMG and Google, the Indian edtech market is pegged to touch $1.96 billion by 2021.

It is no wonder then that last year, Reliance Industries acquired a majority stake worth $180 million in Embibe, an artificial intelligence (AI) edtech platform that is based in Bengaluru.

However, the need for innovative edtech solutions is far greater in Tier II and III markets.

YourStory takes a closer look at startups taking advantage of this nascent rural market that still lacks quality education avenues.

edtech


Technology to the rescue

"A major section of our society lives in rural areas, and it is quite important to have edtech startups in these parts. India still lacks quality education at grassroot level (that is, in our villages) and educating through technology is a better and feasible option," says 23-year-old Anil Pradhan.

In October 2014, Anil founded an innovation school in Odisha's Baral village. A resident of Baral himself, he had to move to Bhopal when he was about 11, owing to his father's transferable job.

"Despite studying in an English medium school in Odisha, I was denied admission in Bhopal's Carmel Convent because of my average English-speaking skills," Anil recalls.

This was his first encounter with the gap between the quality of education available in rural and urban India.

During his third year of engineering, Anil started IPSFRI (International Public School For Rural Innovation) in Baral. Although it follows the same syllabus and curriculum as the Odisha's Board of Secondary Education in Odisha, it employs innovation and technology in its methodology.

Startup Bharat

Anil Pradhan with students of IPSFRI



"Educating students on innovation and technology in rural areas is difficult as study material isn't available in their language. And that's where we found a solution - we designed a digital platform for kids, where they have access to STEM-based subjects in their own language (Odia)," adds Anil. 

IPSFRI has provisions from kindergarten to Class VI. For students of higher classes, Anil arranges for after-school classes. It focuses mostly on skill development and STEM education than depending on 'bookish language'.

"ISFRI has classes called 'Tod, phod, and jod' (dismantle, break, and join), where students dismantle things like old computer monitors and refrigerators to build something new," said Anil, in a previous conversation with YourStory.

Similarly, to bring innovation in geometry classes, Anil introduced 3D printers so that students can understand shapes and measure sides.

What's more interesting is that the startup does not charge students from below the poverty line (BPL) families.

IPSFRI

An IPSFRI student using 3D printer

Labs on wheels

If Anil's school is changing education at the grassroot level, others are improving 'practical' implementations that are inaccessible to students in these areas. Take Bengaluru-based TZP, for example, which is igniting curiosity among students of non-metro cities.

"The mobile planetarium provides a platform for immersive learning. It is helping create excitement and curiosity among village students to pursue science," says Dinesh.

TareZameenPar

Students inside the mobile planetarium from TareZameenPar



So far, TZP has covered five lakh students in Karnataka alone. The startup plans to set up another six mobile planetariums by this July. "We hope to educate 5,000 students each day by then," adds the founder.

At present, the startup is working with L&T Infotech under its CSR initiative, and has also covered students in schools in Tamil Nadu, Andhra Pradesh, and Kerala.

TZP

The TareZameenPar team with the students of the government school in Byala, Karnataka.

Giving back to society

Access to educational initiatives at grassroots level aside, non-metro cities also lack quality coaching. As a result, lakhs of students migrate to cities like Kota, Visakhapatnam, and Hyderabad every year in search of such facilities. But, not everyone has the means to do so.

To solve this gap and to give back to society is Rajan Singh, an IIT-graduate-turned-IPS officer, through his edtech startup, ConceptOwl.

The startup offers coaching programmes that are a combination of offline and online education. Here, the class teacher is replaced by a facilitator or classroom manager. A pre-recorded video allows effective structuring and scripting for the teaching process.

Rajan, also a Wharton graduate, always wanted to be an entrepreneur. In 2016, he started a 'teacherless' online-in-classroom educational platform to help students of Tier II and III areas prepare for entrance exams.

ConceptOwl

Inside an ConceptOwl classroom



"Having grown up in a small town, I have personally witnessed the poor quality of education, especially in science in Tier II, III and IV areas. I don't believe things have changed dramatically," he says.

ConceptOwl recently rolled out dual-teacher programmes in 12 schools across Kerala, including Thiruvananthapuram, Kollam, Pathanamthitta, Ernakulam, and Kasaragod. The startup is in the process of launching up to 10 more by July.

Garnering interest

Interestingly, edtech startups from non-metros are increasingly getting noticed by startups in metro cities.

Since inception, ConceptOwl has raised Rs 3.5 crore, and its principal investor is SunTech Business Solution, a Bengaluru-based software company. "We are in talks to raise another larger round of funding," says Rajan. Anil's IPSFRI received help from online furniture platform Pepperfry in the form of free furniture for the school.

And investors are not shying away from these startups that give small towns the education they deserve. Aarthi Ramasubramanian, Senior Investment Manager, Gray Matters Capital edLABS says:

"We see a lot of innovative ideas from entrepreneurs in Tier II and III cities. This combined with their hunger for success and frugality, makes them great investment candidates. Being gender lens impact investors, we at Gray Matters Capital take into consideration the impact our capital can make before we choose a startup."

As part of edLABS initiative, Gray Matters Capital has recently funded Cuttack-based ThinkZone. The startup encourages women micro-entrepreneurs ot impart tech-driven primary education to undeserved town of Odisha.

"With a lean structure, it makes it easier to expand their solutions to other resource-strapped geographies or even efficiently expand outside India - making the impact more meaningful. We hope to benefit nearly two million students in the next five years with ThinkZone," Aarthi adds.

Dinesh of TZP believes that while the metro markets are overcrowded, it is now time for people to "look back to rural areas for reverse migration."

Unsurprisingly, STEM education is continuing to be the focus for these startups, even in rural India.

However, "The A in STEAM, that is Arts, remains highly deprioritised and I don't see that changing quickly. I think it is going to take some time for Arts to find its rightful place but initiatives like Ashoka University may change things over time," Rajan says.


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