How to Fund your New Business

The ideas are on paper – you did your research, create a business and marketing strategies, a website with all the necessary features, and got your team ready. However, without any initial capital to invest you won’t be able to launch to your business. Finding money for starting a business isn’t easy, unless you have a groundbreaking business model that promises to change the world and gets attention of major investors.

Luckily, there are various available options and pools of capital that you can try tapping into to start your business. The beginning is what often sets the stage for your business, so by doing it right you can set a solid foundation for success. Here are some ways for funding your business. 

1. Crowdfunding
Small businesses can get funded through crowdfunding websites such as Indiegogo and Kickstarter. Instead of looking for a single large investment, these sites allow them to gather their initial capital by receiving small investments from a number of investors. Young entrepreneurs now have the opportunity to raise money for their business, as well as awareness of their business by reaching directly to their customers. Entrepreneurs sometimes use the crowdfunding option first, and then go on to raise money through venture and angel investors for the latter phases of their business once they prove the market demand.

2. Online lending
Instead of taking traditional business loans, businessmen often turn to online lenders. There lenders have become a popular alternative thanks to the advantage of speed (an application may take only a few hours to complete), quickness and ease of online lending. These lenders, such as ALC Commercial, are perfect for fresh businesses which may struggle with getting business loans with traditional banks. Before you get into one such loan, make sure to do your research and put everything to paper. 

3. Small-business grants
Small-business grants are allocated by the government to support various important causes (medicine, education, and social needs) and the development of new technologies. If your business if focused on research or science, you may be able to get a small grant from the government. Browse through the site – a directory of more than a thousand federal grant programs. In order to receive this kind of grant, your business needs to have a high commercialization potential and meet federal research-and-development goals.

How to Fund your New Business

4. Venture-capital investors
These professional investors invest in startups with a proven business model and a high potential for scalability. Venture-capital investors look for big business investment opportunities that need more millions in investments. The startups that receive venture capital money are often considered to have both high-risk and high-growth potential, as well as a good exit strategy in place. Fast-growth companies like this can get several millions of dollars for investing, networking, and growing their business frequently. Venture capital investors often look to recover their investments within 3-5 years, but can offer valuable advice to entrepreneurs on what they should do to bring the product to the market and whether it will be successful.

5. Angel investors
If you live in a large city or a metropolitan area, there are probably angel-investor groups that support startups. These groups of high-net-worth individuals are ready to gather millions to support startups they find qualified. Angel investors usually invest in startup or early-stage companies in exchange for a 20-25% ROI. Many successful companies, such as Google, were supported by angel investors in their early days. To find angel investors, use local networking platforms to find those that relate to your passion and industry.

6. Family and friends
Borrowing money from family and friends is probably the most common way for funding a startup. However, your closest ones need to believe in you and to know that you’ll be able to pay them back. The biggest potential cost of failure, however, won’t be just financial but also personal. Make a list of family members and friends, then trim it down to those who understand your business plans, and then talk to them so they’re comfortable with all the risks involved.

In the end, you can’t fund your business yourself as the majority of startups are self-funding. This is called bootstrapping, and the biggest advantage is that you won’t have to give up any control or equity of your business. On the other hand, it may take you a bit longer to save enough money to start growing.

After considering all of these funding options, you’ll realize that there’s neither free money nor a magic formula to get to it. Everything takes commitment and work on your part, and it’s up to you to choose depending on the tradeoff between paybacks and costs, as well as control and ownership.

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