One of the first obstacles new entrepreneurs face is finding enough startup capital for their companies. This is often a problem even for more experienced CEOs, let alone people who are just making their first steps in the business world. That is why it is important to thoroughly research your options before committing to one or more sources of finance. Fortunately, there are plenty of ways to finance your startup. If your business plan is sound, you shouldn’t have too much trouble finding the money you need. Here are some of the ways you can provide the best funding for your startup, depending on your goals and situation.
Personal Funding
This is usually the most preferred option when it comes to funding your new business. You won’t end up in debt or be forced to sell any shares of your company, leaving you completely in charge of how it is run or what direction it will take in the future. Unfortunately, it isn’t always available, since most people don’t have the amount of money required to start even a small company laying around or stuffed under the mattress. The other downside is that, while you keep control of the company in your hands, you also face the risks alone. It is your money that you are risking and could potentially end up losing it all if something goes sideways.
Angel Investors
If you have watched even a single episode of Shark Tank, then you know what angel investors are. Rich people are eager to increase their wealth by investing in new companies and startups. You can hear about them and their successful ventures from informational sources like AskTraders finance news and other business media. One distinct benefit of using angel investors is that, apart from the funds, you will also get mentoring, which often can be as important as money. Advice from an experienced businessman can mean the difference between the success and failure of your company and shouldn’t be ignored lightly.
Venture Capital
Venture capital funds are always on the lookout for companies that can contribute to their profits. The venture funds managers are professionals strictly oriented on their bottom line. Similar to angel investors, venture funds will provide monitoring on every step of your company’s development. They’re offering help and guidance which can be an invaluable asset on your road to success. Some entrepreneurs may take an issue with this hands-on approach. However, venture funds managers insist on it, especially if they feel that the CEO is lacking experience. This is also one of the major downsides of seeking venture funds. Depending on how much of your company shares you sign over, you may be in danger of losing control. Unfortunately, you can end up with a company going in a completely different direction from your vision.
Loans funding
People often shy away from loans, fearing that they won’t be able to follow the payment plan and that the bank will foreclose on their company. This is a possibility if you haven’t planned everything correctly. You should project your income with payment rates in mind. When you do this there should be no problem in paying even a significant loan off. If you are not comfortable using commercial banks, there are plenty of non-bank business loans you can take out instead. There is nothing wrong with taking on a loan, as long as your business plan is honestly written and not a pipe dream.
Business Incubators
Many cities worldwide offer business incubators as a means of helping people, especially those from vulnerable groups, to start their own business. Some of these may use private funding, while others are run by governments. A combination of private and public funding is also not uncommon. Investors can provide some valuable guidance to the company owners. The proximity of other startups provides a possibility for connections that can be highly profitable for both sides. Business incubators also offer other benefits, like help with bookkeeping or other aspects of the company’s operations. However, their support is limited in time and rarely goes beyond 12 months, often not even that long. After that, you are on your own.
Crowdfunding
Crowdfunding a startup has become one of the favorite ways of gathering funding for new companies. With the rise of platforms like Kickstarter and GoFundMe, crowdfunding is really easy. Eliminating the need for one investor, who would use his money as a leverage to have a say in running the company, crowdfunding has become very popular. That popularity has become a problem in itself since the competition for new companies is fierce and every part of your business plan presented must be flawless, or you risk people skipping you over. Still, if you value your freedom and control over your company, crowdfunding may be ideal for you.
Each of these ways of funding a startup has its pros and cons. It is up to you to decide what is best for your company. One thing to consider is that not all of them cost the same. Some will require a piece of your company as payment, while others will just charge you interest. Whichever you choose, make sure that you fully understand the risks of your choice.
