Funding is, perhaps, the biggest hurdle many entrepreneurs must cross when starting their businesses. Without sufficient capital, you will be unable to run day-to-day operations, produce products, market your business, and hire people to run it successfully. If you have already written a kickass business plan, listed below are a few ways you can raise enough money to bring your dreams to life.
If you’ve saved enough by earning big from your current job or have inherited a fortune from your elders, self-financing your business is an excellent idea. This way, you won’t be answerable to anyone, and you can do what you think is best for your business. It helps build a sense of responsibility and ownership, knowing that your own capital is employed.
However, it’s necessary to ensure your decisions are carefully curated because you are potentially putting everything you have on the line. The stakes may be high, but the right choices will help reap immense benefits in the long run. Therefore, consider skilling up your business know-how to ensure you steer the ship successfully. In fact, this will help you come off as a more convincing investment for other funding opportunities as well. You can opt for MBA programs no GMAT required if you want to fast-track the learning process. Getting higher education will help you brush up on your competencies and learn the ropes of successful business management.
When in doubt, turn to family & friends
If you’re on good terms, your friends and family might be willing to lend you a penny or two to start your own business. In most cases, they are the first ones to help you out, morally and financially. Having a blood relation or a healthy bond makes them strong contenders to finance your business, as they’d be delighted to see you succeed. Chances are, you might be able to score a loan with a relatively low or zero interest rate.
Banks are the oldest and most reliable sources for acquiring financial assistance for a start-up. However, banks do not give loans to entrepreneurs they don’t trust. Therefore, a well-made business plan is crucial if you plan if you want to stand any chance of securing a loan. The more convincing your pitch, the higher your chances of getting money from them. However, you might want to double-check on the interest rates as these can be considerably high. If they are, look for cheaper alternatives such as credit unions and microloans provided by other organizations.
Crowdfunding is a fun and easy way to raise capital for your business by engaging the community and potential investors/customers. People, in large groups, raise small amounts that fund business projects and ventures. An exceptional pitch and out-of-the-box product/service idea can help you raise money from crowdfunding platforms such as Kickstarter, Patreon, Indiegogo, etc. Then, if your start-up does well, the funds will continue to flow.
You can also raise capital for your business by selling your products before manufacturing them in bulk. Though this is very intimidating and difficult to carry out, it is very much possible. If your business functions on selling one product at a time, this source of investment may work for you if you know how to pre-sell your product. However, being overconfident may come back to haunt you. If you don’t have everything planned out and things go south, you will have to pay back your customers.
Ask venture capitalists
Venture capitalists provide new businesses with initial investments to help kick things off. If you have an overwhelming pitch and your business is likely to grow bigger, you stand a good chance of getting VCs on board. As a return on their investments, these investors demand interest, or they charge a fee for taking care of the funds provided by them. In addition, VCs are notorious for wanting to have a say in business decision-making, unlike other investors such as angel investors, which brings us to the next funding source.
Angel investors are wealthy people that choose to give back to society by investing in promising start-ups. They can be an invaluable source of finance for your business. They generally provide vast sums of money. What differentiates them from venture capitalists is that angel investors ask for ownership equity, usually one-fourth of the company. Thus, they will receive profits, just like you. Therefore, making it a bargain for you and your angel investor. On the bright side, you won’t have to return any loans or pay interest.
However, angel investors require a clear direction, a business plan, and sheer devotion because they are ready to splash a handsome amount on your business. You must show them you are enthusiastic about your venture in the short and long term.
Last but not least, government funding
If all else fails, you can look to your country’s respective government for funds. As compared to the other methods of gather capital, this may be more laborious and time-consuming. In addition, the paperwork and bureaucracy can be quite the pain in the butt. However, if you’re here, you’re probably not in a position to complain! For example, the US has the Small Business Administration (SBA). They provide American citizens with different loans at different interest rates.
Raising capital for your brainchild is all that stands between its inception and your success as an entrepreneur. This article mentioned several funding options for you to choose from. Self-finance to friends and family, bank loans, crowdfunding, venture capitalists, angel investors, and government funding. Regardless of the method you opt for, you must have a solid business plan to pay back your loans and provide equity holders with a return on their investment. The ways mentioned above should help you gain a thorough understanding and help you make a wise choice.