So you have a business idea but you do not know how to get your first prototype out there. It can be difficult, especially if you need a good amount of funding to get started.
A lot of people are never able to go ahead due to a lack of funds. Back in the day, there was no easy way to get funding for your project, but today there are simple ways to find funding given that your idea is truly unique and deserves funding.
You Can Use Factoring
Factoring is a way in which companies try to raise funds by using their receivables. This will only work if you already have a running business since a new startup would not have receivables.
There are two types of factoring: recourse and non-recourse. Let’s get to know them:
Recourse factoring: The company sells its receivable at a discounted price and the factor has to deal with the risk of collecting.
Non-Recourse: The company hires a firm for the collection of funds and gives a certain amount of money for it. This is cheaper as the risk of collection stays with the company.
When you sell your receivables you will have a good amount of money to fund your prototype. This can be good and bad for your business. Good because you will get a good amount from the company which can be used to fund your prototype, and bad because you will not be able to recover the whole amount since the company would take a percentage of the amount recovered.
Nonetheless, it can be beneficial especially if you are afraid of bad debt. Once you sell the receivables, it is not your duty to worry about getting paid. You will get your money and they will deal with it.
Get a Loan
You can apply for loans from banks and other financial institutions. The type of loan you apply for depends on several factors including your financial condition and the nature of your idea.
Look for business loans if you already have a business. However, if you have no business and you just want to create your prototype then you should look for other types of loans.
Governments and different financial organizations offer loans to individuals with unique ideas. Look for such loans and apply for one. They are typically offered at low interest rates.
Some universities also offer such loans, but they are typically only offered to students enrolled in that university.
People have used crowdfunding to fund all kinds of projects, from movies to software to appliances.
You can try one of several crowdfunding platforms to have people fund your project. You only need to come up with an idea that people would be interested in.
Your idea should either be beneficial for a large group or offer people something in return, such as a share in profit.
Enter Into a Competition
There are competitions being held all around the world to encourage innovation. If your idea is truly unique, you can take part in a competition and win it to fund your prototype. This obviously is easier said than done due to stiff competition.
Moreover, you must be careful because some competitions accept theories and ideas while some would require you to submit a prototype for consideration. So go through the details and apply carefully.
You might have to pay a fee to take part in such a competition, but it might be a good investment if you have faith in your idea.
Find an Investor
Look for sponsors and approach them with a proposal. You will get only one chance to impress your potential investor so make sure to do some homework and come up with a kickass proposal that answers all questions one might have regarding your project.