When launching a new product, getting the right funding is key. But other than traditional sources, like loans, venture capital, and angel investments, how¬†can¬†you get the cash you need to grow?
Some people would say, “Easy‚ÄĒcrowdfunding.” But that’s just the tip of the creativity iceberg.
We asked nine company¬†founders the following question:¬†What is one creative way to quickly finance a new product-based¬†business¬†OTHER than crowdfunding?
One of their ideas might be the perfect fit for you:
1. Have Your First 10 Customers Finance Development
Particularly in B2B spaces with high price points, if you’re really solving a major pain point, you¬†can¬†often negotiate payment terms well in advance of product launch. Be honest and upfront, and say, “We¬†can¬†develop this product to make your life easier. If you¬†can¬†help us with $X development funding, we’ll give you free access for Y years.”
–¬†John Rood,¬†Next Step Test Preparation
2. Sell It Into Existence
Sell the product before it’s ready and before it exists. Build the product to suit the first customers. You get¬†their¬†valuable feedback on what the product should be,¬†their¬†money to help create the product and a level of secrecy crowdfunding doesn’t offer.
3. License One of Your Products to a Large Brand
Starting a product-based¬†business¬†has prohibitive costs. You¬†can¬†fund it by taking one of your first products and licensing the technology or molding it to a larger brand. Although you’ll lose exclusivity on that first product, you’ll be able to fund the rest of your pipeline. The side benefit is that you’ll have built a great partner you¬†can¬†work with in the future.
–¬†Aaron Schwartz,¬†Modify Watches
4. Sell Subscriptions and Leverage the Contracts
Think hard about your¬†business¬†model. Find the most relevant and related service that¬†can¬†be provided to your prospective customers. Sell your prospective customers those relevant services on a subscription basis with a renewable long-term contract. You’ve now created a recurring revenue stream you¬†can¬†also leverage to get a lump-sum advance from a lender. Use that money to fund your core mission.
–¬†Tim McCormack,¬†Business¬†Finance Store
5. Consult for Cash
If you have a startup and your skills are applicable in other noncompeting industries, then you¬†can¬†approach them, show them what you’ve done and offer to consult for cash. It’s much easier to do than raise capital because the client will be getting your services. The added benefit is that you get to keep all the equity in your company. The downside is that you have to split your time.
6. Do a Pre-Sale
If it’s good enough, it will sell well on pre-sale. Just make sure you¬†can¬†actually supply the orders in a timely fashion. However, a pre-sale with the right anticipation or incentive¬†can¬†help you sell a decent amount before you even create the product. Remember, Bill Gates sold DOS before it even existed, and that’s practically what made the company!
7. Get a Charge Card
Unlike credit cards, charge cards have much larger limits and allow entrepreneurs to finance big-ticket items. The drawback to charge cards is that the balance often has to be paid back quicker than credit cards, so check the terms before you swipe the card. American Express offers a lot of great charge cards for entrepreneurs. ZinePak’s favorite is the Plum Card.
8. Work With Your Supplier
One way to finance a new product-based¬†business¬†is to partner with your supplier. Often, they’ll be open to creative financing options and may give you extended payment terms, so you¬†can¬†sell the product before you have to pay for the manufacturing. Or, they also may be interested in a partnership where they share in the equity if they help advance the financing.
9. Get a Credit Line Before You Need It
A smart way to quickly finance a new product-based¬†business¬†is to have an established relationship with a bank and a significant credit line before you need it. It¬†can¬†easily take banks months to weigh your credit worthiness. The rule of thumb here is that banks are willing to loan you money when you don’t need it, and they won’t loan you money when you do need it.