Recent research has shown that an alarmingly high number of new businesses fail in the first year of operation. One of the primary reasons for this is the lack of funding as every business runs on stable capital. The whole business process from the business idea conception to the implementation and structural setup depends and thrives on that fuel called capital. It is a no-do-without for any start-up. The question remains though, how can a business raise needful capital for its kick-off and sustenance? You can also take help from financial advisor Toronto and make sure you are on the right path when making important financial decisions.
Loans and Finance
There are a whole lot of sources when it comes to getting finances for your business. Start-ups and mini enterprises and business projects talk about loans. Talking of loans, this web directory titled Small Business Loans 2021: Compare Financing Options shortlists the most useful loans and their providers including the benefits and drawbacks of each. It is every businessman’s guide to establishing a successful business presence and a commanding breakthrough.
Many entrepreneurs use bootstrapping when starting their business to raise the needed capital. This simply means scrapping all the personal funds you might have gotten from your savings or credit cards. In some cases, using your personal funds to finance your business instead of borrowing or raising funds is a great idea.
Most entrepreneurs use personal funds until their business becomes profitable before they engage other sources for funding. This is usually very benefitting because you won’t have borrowers on your neck neither will you have extensive loans and monthly payments. However, if you are looking at scaling your business quickly, it could be really profitable to bring in other sources of funding
Consider Family and Friends
Nobody really likes it when others request funds from them except they have a mutual agreement. However, tapping from those close to you for funds might be a great choice before engaging other sources. It never hurts to ask. While some of your friends and relations may not have the funds you need, you never can tell those who may have personal relationships that may be useful to your business.
Asking family friends for help isn’t a bad choice either. Ensure you have your business plan ready and handy before approaching family and friends for help. You don’t want to be taken seriously. It makes it easy for you to explain every detail or step you plan to engage in your business. Plus, they’ll know that they’ll get their money back or some percentages from your business after a given period.
Crowdfunding has become very popular over the years. It’s actually a very interesting option as all you have to do is to put up a detailed description of your business on a crowdfunding platform. Share your goals, plans on how you intend to make it profitable, how much funding you need, etc after which consumers can read about and donate funds if they like the idea. The beautiful part of it is that just anybody can provide money to help a business they really believe in but you have to work hard and present it in a convincing manner.
Another great part of it is that apart from financing, it’s also a great tool for marketing your business idea. This process can also put money in the hands of common people and also cut out professional brokers and investors. It can go as far as attracting venture-capital investment if a company has had a successful campaign. Have in mind that crowdfunding as nice as it sounds is also very competitive to earn money from. So, unless your business is great and can sweep a consumer off his feet with just a description and few images, you may not find crowdfunding working for you.
Get Angel Investment for Your Startup
Angel investors are simply individuals with much cash and a great interest to invest and help an upcoming startup. They also work as a group of networks that collectively screen various proposals before investment. They can offer capital combined with mentoring. Angel investments have helped prominent companies in the past. Companies like Google, Alibaba, etc all enjoyed angel investment.
This form of investment usually occurs in the early stages of the company’s growth and these investors stand to expect 30% equity. So, they always prefer to get more risk in investment for a greater return. The only disadvantage of angel investors is that they invest a lesser amount compared to venture capitalists.
Get Venture Capital for Your Business
These are professionally managed funds kept for the sole purpose of engaging in businesses that have great potential for success. They are known to invest in businesses against equity. They also provide mentorship, expertise and generally serve as a litmus test to where a company is heading while evaluating the sustainability and scalability of a business.
It is more appropriate for a business that is already generating revenues. Companies like Uber, Flipkart with their exit plans and tactics can get tens of millions of dollars that can be used to invest and grow their company at a faster rate. The only risk involved with this source is that they have a window period of three to five years where they must look to refund their money.
Get Funding from Business Accelerators and Incubators
Startups in the early stages can consider incubators and accelerator programs as a funding option since they are available in every major city.
Though used interchangeably, there are few fundamental differences between the two terms. Incubators are like a parent to a child, who nurture the business providing shelter tools and training and network to a business. Accelerators do more or less the same thing, but an incubator helps/assists/nurtures a business to walk, while an accelerator helps to run/take a giant leap. These programs normally run for 4-8 months and require a time commitment from the business owners. You will also be able to make good connections with mentors, investors, and other fellow startups using this platform.
If you want your business to scale up fast, you might want to outsource funding for it. Bootstrapping is good but for how long can it last you? Think about any of the other sources and choose the one most suitable for your business needs.