As thrilling as it is to start a new small business, the stress can be just as insane. Especially, if have to start looking for sources of finance for your startup. Because beyond the creative thinking and careful planning that go into coming up with a winning business model, you as the business owner are likely also facing the arduous task of finding the money to make it all come to fruition. It is also essential to remember that careful planning is key when you wish to raise finances. You need to: know exactly how much money is required, consider the setup costs, the investment needed, working capital, and growth and development and evaluate how long you need these investments for and what security you can offer. Here are different sources of funding to consider when starting your business;
Personal Investment; self-funding from your savings is always preferred. You have to make some personal investments, which could include your savings or other assets. You cannot start a business without putting something of your own into it. In addition, others will hesitate to give you money if you don’t contribute. By not investing yourself, you will demonstrate your lack of commitment or even confidence in the venture.
Angel Investors; this category refers to retired company executives or wealthy individuals who make direct investments in startups and small firms. These investors are typically leaders in their respective fields. They contribute by means of their network of contacts and experience and also provide their technical and management knowledge. However, you should know that in exchange for their investments, angel investors might monitor your startup management practices and might want a say in your business.
Venture Capital; this funding source is ideal for specific startups that have a high growth potential. The venture capitalists basically invest in your startup in exchange for equity, so you have to share ownership with an external party. Venture capitalists also expect a high return on investment once the business is properly established. Always look for venture capitalists that have a background in your business’s industry and can bring relevant knowledge and experience.
Business Loans; business loans are the most common source of funding, not only for startups but also for small and medium-sized businesses. Banks and other financial institutions offer many types of business loans in return for regular interest payments. They will need you to have a solid business plan in place. Your plan should show potential and have numbers to back it up. Having a good idea is not enough; you need to have evidence to support it. In some cases, banks might ask you for something as collateral, but every situation is different. If you don’t offer collateral, they might charge you a higher rate of interest but this will help you in avoiding bad credit too.
Crowdfunding; as the name indicates, crowdfunding refers to getting funds from a crowd, i.e., the general public. Entrepreneurs typically use this option when developing a product that’s essential to people and not available elsewhere. There are crowdfunding websites that enable members of the public to pool their funds to help various causes. Startups can use any of these sources of finance to launch their operations and offer quality products and services to people
Grants and Subsidies; bringing innovations to light is not always easy. As a result, some government agencies provide support to budding businesses. Access to this funding allows you to cover different expenses, such as marketing, research and development, equipment, salaries, and improvement in productivity. Technically, governments give grants to startups unconditionally and you don’t have to repay them. But you cannot use the grant money for any other purpose, or you will be vulnerable to legal action. Once a government source has provided you with funding and you fulfill the terms of the program, that agency might offer you additional funding in the future.
Now that you’ve seen a wide variety of options available for financing your small business startup, it’s critical that you carefully consider the pros and cons of each option before committing.
Speak to us at Korsell Corporate Consult Limited, let us assist you with your business planning Call: 055 391 9618 or Email: info@korsellcorporateconsult.com