Asking people you know to pitch in on financing a new business is anything but a radical idea.
Before anyone ever heard of banks, informal, person-to-person loans were the way many businesses got started – and the way many investors made money. Here are some tips:
- Brainstorm a list of the people you know
- Narrow your list based on trust, money, experience and lack of emotional baggage
- Create a ‘best bets’ list.
You have other options
Another option is bootstrapping, which is where you self-finance and keep overheads to a minimum until your business is up and running.
A third approach is to approach a bigger company that has shared synergies with your business idea, for start-up finance.
Then there is venture capital funding, where investors are looking for a return on their investment.
Do your homework
In all of the above instances you need to do your homework and make sure that the potential funder is the right fit for your business and the way you want to run it.