Startup financing is where entrepreneurs and new small business owners struggle. There are always a lot of upfront costs that need to be covered and always limited financial support. As you’re financing a new mental health business, you want to procure funding from different sources, as your bank typically is not going to want to be the only investor in your business.
A mental health startup needs to be proactive in soliciting financial resources. Fortunately, there are several places to go to obtain startup funding. Here’s where and how to get it.
Strengthen Your Startup Proposal
For would-be investors in your startup, they need to know two things. The first is how strong your business is. Create a business plan that outlines with clarity who you are, what you do, and how you make money. Optimize your startup.
Go through it with a fine-toothed comb and maximize its income potential. This leads us to the second thing would-be investors want to know: how they will make their money back. There needs to be a definitive plan there as well.
Put in Your Own Money
You need to show an investor that you’re committed and have put your money behind the startup. Don’t put yourself at unnecessary financial risk but funding from your pocket is funding that is the easiest to get.
You may also want to ask your parents, family, or friends, offering them either equity in the startup or a definitive way to recoup their investment. If you do this, however, using a family member’s or friend’s money can stress the relationship.
Applying for SR&ED Funding
SRED funding, the Scientific Research & Experimental Development program, issues tax credits to reimburse businesses for their R&D efforts. Startups often pursue different research to arrive at new products, services, materials, or processes.
This sort of research doesn’t need to be self-funded. SR&ED can help on the backend, often reimbursing most costs relating to R&D project salaries and wages, materials consumed, and overhead costs.
Apply for a Bank Loan for Startups
A bank loan is the most common funding source for small and medium-sized startups. Banks can customize repayment programs. Different banks offer different terms. If you have a solid business plan that some key fundamentals supporting your claims, you may be able to get sufficient startup funding from a bank to at least get you started.
That said, many startups end up requiring more than a bank loan can provide, which is why other funding sources are valuable.
Startup Help from Venture Capital Firms
Shark Tank-style venture capitalists are not for everyone. Startups with high-growth potential in attractive sectors like tech, communications, biotechnology, and similar sectors may benefit. The upside with venture capital firms is that they can offer lots of funding fast to leading-edge, strategically-positioned startups.
The downside is that they take ownership or equity. They also want a return on their investment and will pursue that return as soon as the deal is signed.
Find an Angel Investor for a Startup
An angel investor is typically a wealthy individual who wants to contribute their own experience and knowledge to help grow your startup. They may offer funding from $25,000-$100,000 or more in favor of acquiring a board seat, being given a management-level job, or something similar.
Angel investors sometimes may negotiate equity. However, this isn’t a guarantee. While venture capitalists are about getting their investment return, angel investors may be more inclined to offer their guidance and advice. They can be a major asset in growing your startup.
Apply for Government Grants
Several government grant programs and subsidies can be used to either fund or reimburse your business for specific costs. At both a federal and provincial level, small business support programs exist.
If it’s a grant, there may be excessive competition. Government grants also often require the recipient to match the funds being given or only cover a portion of total expenses. The benefit of receiving a grant is that it doesn’t need to be paid back – a huge win!
Sign Up with a Startup Incubator
An incubator provides a space for startups to work in. They also provide you with business advice, training, and access to funding. Wealthy individuals typically fund incubators, industry organizations, or post-secondary institutions.
They offer networking opportunities in a big way though not all provide funding, and to what extent varies depending on the incubator. They often have an application process, and acceptance is not always guaranteed.
Crowdfund Your Startup
Many startups have seen major success with crowdfunding. Beware though. There are legal issues that can occur through crowdfunding. You also risk product duplication if you offer a glimpse into a first-run product.
The benefit of crowdfunding a startup is that no equity is traded; if successful, you get the funding you need to keep your startup going. It’s rare, however, that this method of startup funding will provide you with everything you need.