It’s a long way from having an idea for a startup to actually starting a business. There’s a lot of planning and market research to be done between the two if you want your business to be successful. However, the biggest obstacle is getting the funding you need to get your business going.
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Securing the funds is always difficult not just because loaning money is never pleasant but also because it gets you into a long-term arrangement that sometimes lasts longer than the business itself. However, if you plan things right, get the loan that best suits your needs and don’t miss any payments, the initial financial injections will put your business on the map.
1. A bank loan
The simplest way to get money for your startup is to go to the bank and get a loan. That way, you’ll receive all the money at once and you’ll be able to return it with interest in equal installments for years to come.
Then how come most people dread doing that so much? Well, first of all, it’s hard to get a loan, because you need to have a very good credit score to do so. Secondly, in the long run, the interest rates are pretty steep and you will end up paying much more.
2. Credit line
A credit line is very similar to the bank loan but it leaves the businesses with much more freedom to run their daily operations. It’s also done in a bank, and it requires a good credit score and a business plan to prove that your company is making money (or will be able to make it in the near future).
The difference is that you don’t get all the money right away but are able to take only as much as you need in a particular installment. This too is then paid back on a timetable and with interest. It’s the best choice for small businesses that need a cash flow.
Crowdfunding is a relatively new option for getting the funding but it’s proven to be very effective – at least for a certain kind of products. The funding is obtained by the potential users or buyers of your product who give you the money based on the promotional materials you’ve created. In return, they get early editions, special perks or other tokens of gratitude.
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This concept works best for art projects such as movies or computer games, where effective trailers could be made to make the audience interested. This option might not work for those without social media followers or marketing experience.
4. Marketplace loans
Marketplace loans provide better rates and safer returns than banks. These peer to peer loans are best suited for smaller businesses that need the money to get the door opened and don’t have the manpower or time to deal with complicated bank procedures.
Fixed rates online loans vary from $5000 to $50,000 and aren’t so-called payday loans. They are long-term investments coming from individual lenders. Without a bank structure in place, there are also no additional fees, which means you can pay off the loan as soon as you’re able to.
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5. A strategic partnership
A strategic partnership with another business is one of those deals that come with both benefits and drawbacks. In a way, it’s a simple and straightforward path to getting the money, but in the long term, it could also slow your business down.
The idea is that a single partner buys a bulk of your products or orders your services in advance thus providing you with the money you need to keep the lights on for a while. However, this also means that your business is tied to the fate of another company, and if you lose their support, you might go down completely.
6. Angel investors
The term angel investor refers to a specific type of startup investors that are looking for businesses they could invest in early on and provide significant returns rather quickly. This is mostly done in the tech industry when an angel investor notices a patent that might turn into something important. These investors usually have a hands-off approach and leave the day to day running of the business to the company itself.
It’s pretty hard to get the money for the startup. However, there are options out there, you just need to find the one that fits your business needs.
My name is Alex Williams. I am a journalism graduate and a rookie blogger trying to find my luck. Blogs are the perfect opportunity for presenting yourself to the wider audience, getting the chance to showcase my expertise and receiving recognition. I am a regular contributor at Bizzmark Blog | Facebook | Twitter