Dear Your Business Credit,
I would like
to start a Web design business and need about $2,000 to cover the costs of a new
computer, a new phone and some other equipment. I just graduated from college
and don't have much money saved. Do you recommend crowdfunding, or should I try
to get a bank loan? -- Jim
on your graduation. Starting a business can be a great way to get work
experience that will make you more marketable, whether you stay in business for
yourself or eventually decide to take a job somewhere.
I would suggest
looking into another route altogether to get yourself set up. If you already have a
laptop and phone, see if you can get by with them -- as long as they're functional -- during
your startup period. Look for work through freelance marketplaces such as Mediabistro,
PeoplePerHour, or Elance to raise money to pay for the equipment you need.
As you get
feedback from the marketplace, you will have a sense of where you really need
to put your money to grow the business.
if you don't have basic office equipment, you will need to find a way to buy it.
It will be hard to get a bank loan for a startup, so I would suggest asking a
family member for a loan or using a credit card if you have good credit and can
get a decent interest rate. It can be a good way to build your credit profile.
Pick a card
that awards rewards points, and you may be able to cash some of them in to pay
for other things you need for the business. One advantage of using a credit
card is you don't have to write a business plan to sell a lender on your idea.
It's your decision alone to borrow within your credit limit. Just make sure you
don't borrow more than you can pay back on time.
crowdfunding a good option for you? I'm not so sure. According to Kickstarter,
one of the major sites, more than 43 percent of campaigns on its platform reach their
funding goals. The entrepreneurs I know who have raised money through
crowdfunding have already made a big effort to build a following on social
media, so they can solicit support from a wide audience. That takes a lot of
time. Since time is your most precious commodity as an entrepreneur, you will
need to decide if the investment of those precious hours is worth it.
successful campaigns I have seen for small businesses have also tended to offer
new products that customers want to buy or have been for existing stores that
needed help from supporters to meet a specific goal, like moving to a new
Take a look
at Kickstarter. The most funded campaign was the Pebble Watch, a cool smart watch -- similar to a smartphone,
but in the form of a customizable watch. It raised almost $10.3 million. That
was followed by the OUYA video game console, which raised nearly $8.6 million.
don't need to raise that kind of money to get started and it will be hard for a
fledgling web design business to compete for attention against high-profile
projects like this, it's probably easier to turn to a more direct route: the
Bank of Mom and Dad or a credit card. Put the time you save into winning
customers, which is likely your most important job right now. Good luck!
See related: Credit and finance options for young entrepreneurs, Entrepreneurial and under 21? You'll need to build a credit record, Small-business bank loans become a bit easier to get