By How to Fund Your Small Startup
As a business you are advised never to place all your eggs in just one basket. That is especially true when financing that new business. Diversify the sources of your financing for better results as some sources may fail while others lend you. With different sources of funding you will be able to meet the specific needs your company requires.
Starting a business is never easy. There are lots of parameters involved with finance being at the top of the priorities list. Many entrepreneurs will always look for how to finance a startup before anything else. There are several ways one can source for funds to start their business especially in the middle of a pandemic. Here are some of the places you can get finance:
Crowdfunding
It is among the new ways to fund a business in the initial stages. Crowdfunding is like taking contributions, loans and investments from several people at a given period.
Crowdfunding works in a very easy way. The entrepreneur writes a detailed description of the startup on a platform. They must include the goals of the firm, how they will make profit, how much money they require and the reasons. Customers will then read all about that company information and give cash if they click with the business idea.
Technically anyone can give money where they see a business opportunity they like. However, you should understand that crowdfunding is competitive. The crowdfunding platform has several other entrepreneurs who need funding. You have to convince customers with the description that your startup is the best and quality images too.
Personal Investment
It is obvious that the very first investor in a new business is the owner. You could invest in the startup with cash or with collateral on some assets you own. Such an initiative will show bankers and investors that you are commitment to the startup for the long run. It also shows that as the owner you are ready to take risks.
Venture Capital
Understand that venture capital is categorically not for all entrepreneurs. Usually venture capitalists will look for high-growth potential companies that major in communications and biotechnology and information technology or generally technology-driven companies. These capitalists will be like shareholders in the company as they will take up some equity to help the business carry out a high-risk project.
Venture capital means you give up some equity to a third party. These capitalists expect huge returns on their investment especially when the company starts selling its shares to the other potential investors. As you look for venture capitalists make sure you select capitalists that are knowledgeable and have relevant experience to bring to the business.
Angel Investors
Angel investors are wealthy people or retired executives who wish to invest in small startups. These are experts in their specific fields of practice and they will not only bring business networks and experience, they will also aid in the management and technical knowledge. These investors love financing the small startups during the initial stages with an amount between $25,000 to $100,000.
For risking their cash, the investors have the right to supervise how the company management operates. This will involve an assurance of transparency and a board of directors. Angels are never vocal and to find them you have to look at the right places. Normally, you will find them in specialized associations or websites on angels.
Bank Loans
For the small and medium-sized companies, bank loans will always be a common source of funding. Banks offer diverse advantages either via customized repayments or personalized services. You should look around for a bank that caters for your business needs.
Bankers will want to partner with businesses that show an excellent credit and sound track record. You still need to have a perfect business plan for the bank to consider your loan request.
Business Incubators
These are business accelerators that usually focus on the high-tech sector. It provides startups with support in the various stages of development. Local economic development incubators are more focused on revitalization, job creation, hosting and sharing services. Incubators invite future firms to share their area of operation and the logistical, administrative and technical resources.
Incubation phase could last up to about two years. Once the startup has already produced the designed product, it leaves the incubator’s firm to come into the industrial phase as a stand-alone business. Most of the businesses that get this kind of funding are in the industrial technology, biotechnology and information technology sectors.
Small Business Credit Cards
Some of the credit card issuers only look to satisfy the small business market. Most of these have special benefits such as airline mileage points and cash back rewards. Some of the credit card issuers will ask the owner’s credit history and personal credit score to be tied to the card. That only means that late payments or defaults on the credit card will affect the personal credit rating of the business owner.
You can apply for a small business credit card via online or the bank. Some of the renowned small business lenders are Wells Fargo, Capital One, American Express and Bank of America.
Small businesses are often faced with the challenge of raising sufficient capital to start. However, with the above options you can source funds to start a business even in the middle of a pandemic. Be careful on where you lend the money and always look at the terms. Make sure they are favorable and you can easily meet them.
