The digital age is a great time to start a business. A lot of the tools, supplies, and other needs to start a business, regardless of its scale and industry are easily accessible online. In fact, it is possible to launch a completely online business from the comfort of your home. The only question is, do you have the capital to do it?
In this article, we are going to share with you the different choose from. Here they are:
The easiest source of funds that you can reach is your own. Do you have a part of your savings to spare to launch your business? Are you confident in your own idea that you can put your own money at risk?
Think of it this way. If you’re not confident enough to invest your money into your own venture, then how will you be able to convince other individuals and organizations to put their money on the line as well?
Just make sure that you have enough left to serve as an emergency fund, especially if you don’t have other sources of income to support you.
There are different types of business loans that you can apply for. They are typically categorized into secured and unsecured loans, though.
Secured loans are those that come with collateral (usually in the form of property and other types of assets). This ensures that the lender will get their money back in one form or another. It’s usually a lender-recommended option for business owners who still lack the business financial history to back up their projections.
The benefits of getting secured loans are their lower interest rates, higher borrowing limits, and longer (and more flexible) repayment terms.
Meanwhile, unsecured loans are those that don’t require any form of collateral. The lending institution will simply rely on your word that you will repay your loan. This is the reason why this type of loan typically has higher interest rates, smaller credit lines, and shorter repayment terms.
Small Business Grant
Don’t want to dip into your personal savings, yet you also don’t want your business in debt? Then we recommend looking into grants instead. These are programs that were designed to provide monetary assistance for budding entrepreneurs provided that they meet the eligibility requirements.
Most business grants are provided by government offices. Although there are a lot of non-government and non-profit organizations that also provide the same opportunity.
Grants and subsidy programs are in great demand, so you should expect a lot of competition. Some people apply to multiple programs to increase their chances.
For us, what’s important is to refine your business plan, practice your presentation, and stay confident during your interviews. Show them why you deserve the assistance more than anyone, and we’re confident that you’ll be able to convince them to invest in you and your business.
If you can’t convince a group of people, then why not convince everyone else? Crowdfunding is a way of obtaining funds for your business by pooling small contributions from a large number of people. This is an ideal source of funding for those who are particularly skilled in digital marketing. After all, you’ll need to sell your idea to more people.
The great thing about this method is it gives you an idea of how your target audience perceives your business idea before you even start.
There are numerous crowdfunding platforms online. Kickstarter, Patreon, and GoFundMe are just some of the most popular ones. Each of them has its own pros and cons so take your time in choosing the one that best fits your business.
For instance, Kickstarter is great for developing new products while Patreon is more ideal for those who require a steady and regular stream of monetary support.
Friends and Family Investors
Crowdfunding places the fate of your business in strangers’ hands on people who won’t necessarily get your vision right away. This is probably the biggest disadvantage of this efficient funding option.
Have you ever considered asking your loved ones instead? They know you best and you have already established your trustworthiness with them.
Should you choose this method, though, then it’s best to keep everything professional and systematic. This will not only protect the bond you share with your loved ones but will also establish how serious you are in growing your business.
Don’t just randomly pitch your ideas during dinner. Instead, prepare for your meeting as you would with any investor.
Create your business plan. Give your friend a copy in advance. Set a meeting and pitch your idea in a professional manner and setting. Most importantly, don’t forget to discuss your repayment or ROI plan.
Friends and family can be great investors. They (typically) won’t require any interest and collateral. Let’s be honest, though. Not all of them are as supportive as you’d like them to be, nor do they have the vision of an experienced investor.
This is where angel investors come in. They are experienced investors looking for promising entrepreneurs to help out. In exchange, they will own part of your company and be involved in making business decisions. They’ll also receive a percentage of the profits should you decide to sell your business in the future.
The biggest advantage of this method of funding is the lessons you’ll learn from your angel investor. It will give your business that boost of expertise that you wouldn’t have otherwise.
The catch? They’re quite challenging to find. You will need to get referred to them most of the time. They can be difficult to impress as well. Their experience allows them to accurately gauge the profitability of an idea, after all.
The easiest way to find them is by taking advantage of connection services online. These are online platforms that seek to match interested angel investors with entrepreneurs.
Angel investors and venture capitalists are commonly confused with each other. We’re not surprised given their similarities. For one, they are both established investors who are willing to provide financial support to new entrepreneurs.
They have a few differences, though. First, most angel investors are individual investors while venture capitalists are companies.
Second, while they certainly hope for your business to succeed, a lot of angel investors won’t expect much growth in the early stage of your business. On the other hand, most venture capitalists will require demonstrable growth.
Incubators and Accelerators
Incubators and accelerators are organizations that provide financing, training, and support to promising companies. They are often provided by educational institutions and industry leaders not just to help young entrepreneurs but to also ensure the future of their respective industries.
However, just like angel investors, it is important to take note that some incubators will take an equity stake from your company. Not all, though.
The number of incubators and accelerators in the country is steadily growing. You’ll find that most cities have at least a couple already, especially in districts with universities that offer strong business programs.
One of the first hurdles that any budding entrepreneur must face when launching a startup is to secure the funding their business needs for a smooth start. Fortunately, there are a lot of ways to get the money you need.
The simplest method is to dip into your personal savings. Those who don’t mind incurring debt have multiple loan options as well.
Otherwise, you’ll need to find people and organizations who will believe in the profitability of your idea just as you do. These investors come in different forms: as a family member, government office, venture capitalist, or even a complete stranger.
By the way, please don’t be limited to the methods we have mentioned above. There are certainly other ways to secure the funds you need to start your business. We have simply featured the most common options available. Good luck!
Mike is the Editorial Director at Lendza. He enjoys helping entrepreneurs and startups succeed through smart, innovative strategies. He’s partnered with CEOs and executives to grow businesses from the ground up. Before his work at Lendza, Mike was a stock market analyst. When he’s not traveling for work, he enjoys reading adventure and science fiction novels.