One of the biggest challenges that entrepreneurs face is finding the necessary funds to grow their businesses. Startups have to deal with various costs, while ongoing businesses have to finance growth and working capital. As money does not grow on trees, there are a number of ways to fund your business.
We will love to see your business grow and make huge impacts, which is why we have compiled in this article five concrete ways to raise the money you need for your business.
This means financing your company by scraping together any personal funds you can find.
In many cases, using the money you have instead of borrowing or raising is a great approach. In fact, some entrepreneurs continue to bootstrap until their business is profitable. This can be beneficial because it means you won’t have extensive loans and monthly payments that can weigh you down, and investing some of your own money will usually make investors and lenders more willing to partner with you down the line.
Friends and Family
If your funds are not enough, you can turn to the people closest to you. This is often a good first step before considering external funding. Family members and friends can be easier to persuade than anonymous lenders because they are less likely to demand stringent repayment terms or high-interest rates.
Borrowing from friends and family comes with its own set of risks. If the venture fails, or if it takes much longer than anticipated to repay the loan, your relationships can suffer.
Before you ask your friends and family for money, you should have a business plan ready. This way, you can explain to them exactly what you are doing and how you will make money. Also, ensure that you have all terms of the loan written out. That includes how much you are getting, the amount of interest charged, and the terms and deadline of repayment.
Angel investors are groups or individuals who invest their own money into other people’s businesses. They stand out because they tend to invest in companies at earlier stages of growth and are always on the lookout for the next business to invest in. Many of the biggest tech companies today, including Google and Yahoo, were funded by angel investors. Typically, an angel investor is one who is successful in a particular industry and is looking for new opportunities within that same industry, or other industries. Not only can angel investors offer financing to get your business off the ground, but some may also choose to guide you. They may also leverage their existing contacts within an industry to open doors for your business.
Businesses have been using the internet to market and sell things since the 1990s. However, over the last decade, the web has become a new source of financing as well. With this, you can get funding from websites where investors can support your business no matter where they are in the world.
You will be required to set up a campaign and name a target amount of money you want to raise, as well as create perks for donors who pledge a certain amount of money, such as early access to products, discounts, and so on. You then raise money for the campaign over a specified time. Some websites you would use for this financing method are Kickstarter, GoFundMe, Indiegogo, Crowdrise, and many others.
Loans can be gotten from banks or other financial institutions. This method is one of the oldest, although many do not prefer it.
To get loans, you might be required to show that you’ve started gaining traction and making money (and that a loan would help you earn even more). You may also need to present a well-detailed business plan. Your business’ financial projections give lenders the details needed to be sure of the income you would have to repay loans, including interests. Usually, bank loans do have legal regulations, which will have to be followed accordingly.
In conclusion, entrepreneurs must weigh the benefits and downsides of available funding options and determine which one provides the greatest flexibility at the least cost. There are many options for financing your business, so do not get discouraged if one does not work out. By demonstrating due diligence and resourcefulness, you can easily raise the capital you need to move your business to the next level.