Lack of funding is a common reason for startups to fail during the beginning year of their operation. Money is imperative for any business endeavor to flourish. From an interesting idea to an established business flow, money is the driving force. So the million dollar question that arises in any entrepreneurs mind is how to finance their startup?
Once you have decided that your business needs financial aiding, you need to find the sources. There are various money lending sources in the market that you can approach depending on the nature and type of your business. In this article, we have gathered a list of seven funding options that will help you in raising the capital for your business.
When it comes to raising capital bank loan is the first option that entrepreneurs seek. It’s a common method of funding and there are multiple loan plans for budding businesses to choose from.
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Loans are mainly divided into two categories, secured and unsecured loans. Secured loan plans use company assets like property etc as a security which they can possess on the account that you are unable to repay the loan and subsequently they have lower interest rates while unsecured loans in lieu of collateral require a personal guarantee and the interest rates are much higher compared to a secured loan.
Crowdfunding is a great way for new businesses to raise their fund. The steps are pretty easy. You need to sign up on a crowdfunding platform of your choice, put forward your idea, pledge some rewards and start a campaign. There are many potential crowdfunding backers out there who would like to invest in your business if they see positive future prospects. You can even look up potential backers on internet databases that provide backers email lists.
Venture Capital firms can also assist you by providing financial aid to your growing business in exchange for equity. Added benefits of Venture Capitals is that they help you with professional advice and expertise although venture capitals mostly invest in fast-growing businesses, considering the competitive nature of the corporate industry.
Much like Venture Capitalists, Angel investors are high-net-worth people who invest their own money in startup businesses. Although they provide much less financial equivalent compared to Venture Capitalists but, they have a keen interest in budding startups.
There are many large business corporations that like to invest in other small businesses as well. Corporate investors assist multiple startups every year. They offer much more funds compared to individual Angel investors. Through Corporate investment, you get your funding and are able to make connections with investors, mentors and other budding businesses expanding your professional contacts.
Grants are funds provided to businesses from government institutions. You can gain your capital without selling any equity or acquiring any kind of debt saving you the worry of loan repayment, interest rates or refinancing. You can apply for a grant and on qualification, you get the funding that your business needs although qualifying for a business grant is quite difficult and even difficult is to find to find. You can opt for Federal grants or Small Business Innovation Research program etc.
Microfinance Providers or NFCBs
NFCBs are those financial corporations that provide you services similar to banks except meeting the legal requirements. When you are not approved for a bank loan you can turn to NFCBs and have access to financial services of conventional banks. These are increasingly becoming popular and great for those businesses whose credit rankings are not favored by banks.
When you want to grow your startup fast, you will need financial aid from outside sources. The aim of the article was to address your concern regarding the sources of finance and hopefully assist you in choosing a funding option.