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Editorâs Note:Â YoungEntrepreneurâs Ask the ExpertÂ column seeks to answer questions about everything from starting a business to growth strategies. To follow the column on Twitter -- and ask a question -- use hashtagÂ #YEask, or leave a comment below. Your query may be the inspiration for a future column.
Q: I want to start a paper recycling business. Where do you recommend I look for capital to start on a small scale?
-SirWamala Senkungu Deno
A: Funding is a big question for anyone starting a business, as you have a lot of decisions to make.
A small loan from my dad, along with bootstrapping -- meaning the startup was financed by myself -- was how I was able to get my business off the ground.Â While going down this path allows you to stay in control of your destiny, relying on your own investment can be scary.Â I suggest you have 18 months of operating cost lined up before you move forward.
If you ask family or friends to invest in your company be prepared for your relationship to change.Â They will be asking a lot of questions about the business and will have a right to know the status.Â Make sure you draw up a contract, understand the repayment schedule and what reporting they will need in advance of taking their money.
If you are cash strapped and unable to reach out to family or friends, crowdfunding can be a good alternative, especially if you have a creative idea that people can get behind and support. It could be a great platform for your recycling company if you have invented a new method or technology or you have a social entrepreneurship angle.
If you go down the crowdfunding route, you will need to think of fun and inventive ways to entice strangers into funding your startup.Â What do they get if they invest?Â If you are not sure, I would recommend researching crowdfunding sites. Iâm a big fan of Rockethub and Kickstarter, but Iâm sure there are platforms focused on green businesses.
As far as angel investors are concerned, in my experience, they have been elusive and not usually interested until you can show youâre a success.
Lastly, you can also look at microloans and specialized funding alternatives.
If you are still overwhelmed with options, reach out to your peers and find out how they did it and why they chose their route. You can also jump into your local entrepreneurship networking events and mentoring programs and ask a lot of pointed questions. I utilized SCORE, a non-profit organization that offers free advice from retired professionals, and House of Genius to bounce ideas off a group of professionals who similarly volunteer their time and feedback.
Good luck in your journey, and remember the best way to change the future is to create it.
Have a question for YEâs experts? Submit your questions in the comments section below and those with the most likes from other readers will be answered. On Twitter, use the hashtagÂ #YEask. Include your first and last name, your location (city and state) and the name of your business.