Startups

WiseCrest LLC on the Methods and Risks of Founding a Startup without Early Funding

The Strategies and Corresponding Risk for Startups without Early Round Funding

3 minute read

Many people who want to start a business have no funding lined up. These people have few options when it comes to gaining the money needed to keep a new business running. Starting a new business without investors can be extremely risky. WiseCrest LLC, a business aiming to connect founders with investors, describes 4 ways in which new businesses can get started without capital and explains the risks inherent in such a plan.

 

  • Start Part-Time

Don’t quit your day job right away. Staying in your current job will help you to pay your expenses and take care of yourself while you are trying to start your new business. This will also enable you to put all your profits back into the business rather than using them to pay yourself a salary. Keep your business part-time until it is apparent that you will be able to support yourself and your employees on the profits alone.

The downside of this approach is the extreme burden these places on both time and resources. A new venture requires a tremendous investment of time in order to launch successfully and adding this on top of an existing commitment may prove too difficult to balance.

 

  • Ask Friends for Money

This can be a risky prospect because friends may look down on you for asking them for money. If you have friends with enough disposable income, it may work. You may need to give your friends a stake in the company if they contribute enough money to your cause. This could cause your company to fall out of your control in the future.

Crowdfunding could be another viable option if you can’t find friends in the local area who are willing to invest in your business.

 

  • Use Credit Cards and Personal Loans

If you can’t get a traditional business loan, start the business using your own personal loan or credit cards. This can be a risky proposition because if the business fails, you will be paying back the obligations for a long time, and unforeseen personal expenses may create an additional drain on the business. Interest rates on personal loans and credit cards are generally significantly higher than with a business loan, so if you could apply for a business loan, do so. Any amount you borrow will have to be paid back, so carefully consider your business’s prospects to make a profit before you get a loan.

 

  • Take Advantage of Local Programs

You may be able to find a local business incubator which is prepared to assist you with financial help as well as basic support like office space. They may also offer administrative services. Incubators are a good choice when a business has a solid plan and a bright new idea. These programs may be competitive, so make sure that your business plan is strong and kept fully up-to-date.

This is perhaps the least risky of the above 4 options, however it is worth noting that no business can survive without funding, no matter the quality of the idea. An incubator may provide support and be a good method of networking with potential investors but is not a direct substitute for the money that serves as the lifeblood of new businesses.

 

Manage Business Risks

It goes without saying that starting a business without funding is extremely risky. If you are not investing someone else’s capital, you are frequently contributing your entire life savings. It may be that your business idea is not solid enough to justify such a risk. If your business fails, you will still be expected to repay all your obligations.

WiseCrest LLC reminds readers that with a failed business in your past, it is less likely that you will be able to secure funding for another business in the future. It may be best to hold off on starting a business until you have a steady source of capital, such as from an angel investor or business loan.

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Adrian Rubin

Adrian Rubin is a freelancer, creative arts director for various marketing and advertising companies in the New York area. Adrian Rubin specializes in making memorable campaigns. You can learn more about his services here: AdrianRubin.net
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