Looking for capital for a startup can be a long and tedious process. Lack of funding is one of the common reasons why new businesses fail shortly after their launch.
Money serves as the bloodline of any company. It is not only crucial for startups, but it is crucial at almost every stage of business operations.
The amount of funding you need depends on the nature and type of your business. Below are some of the different sources of financing for your startup.
Related Post: How to get venture capital funding for your startup
Look for Investors
Investors can provide you with the funding to start your business. They can offer venture capital in exchange for an active role in the firm or an ownership share.
Venture capital is not the same as traditional financing. Venture capital has the following aspects:
- Focuses on high-growth businesses
- Invests funding in return for equity, rather than debt
- Longer investment range than conventional financing
- Involves higher risks in exchange for higher returns
Venture capitalists may want a seat on the company’s board of directors. So if you are looking for venture capitalists, be ready to give up control and ownership.
To secure venture capital funding, you may take the following steps:
- Find an investor. Look for angel investors or venture capital firms. Do background research before deciding to know if the investor is reputable.
- After finding an investor, you can share your business plan. The investor will review your plan to check if it meets their investing criteria.
- If the investor agrees to work with you, the two of you need to work out the terms. This step involves discussing the conditions that will make the deal beneficial for both parties.
- You can get the investment once you and your investor reach an agreement.
Today, private investors can even invest in firms pre-IPO faster. There are new solutions, like Linqto, that provide quick and affordable access to global private securities markets.
This article outlines how Linqto can help accredited investors trade securities in the world’s leading unicorns.
Get Small Business Grants
Several organizations offer grants to small businesses to help them take off. Some institutions provide funding to minorities or veterans who want to start a firm.
Ensure you understand the terms of any grants you receive. Some organizations provide grants as loans, meaning you may need to pay the money back.
That said, not all grants need repayment. But, it is still good to know the conditions you agree to before you accept any funding.
Try Self-Funding or Bootstrapping
You can always try self-funding or bootstrapping to start your business. This option can be an effective way to finance your startup needs.
Bootstrapping can be beneficial to first-time entrepreneurs. These new business owners usually have trouble getting funding.
You can use money from your savings. Your family and friends can also contribute funds to help you get started.
The advantage of self-funding is that it is an easy way to raise funds due to fewer formalities. It also costs less compared to other avenues of getting capital.
These are some reasons why you should consider bootstrapping as a first option. This alternative is an excellent choice. This is especially if the initial funding you need is small.
Apply for a Loan
If you want to complete control of your firm but do not have enough funds, you can try a small business loan.
To boost the chances of getting your loan approved, you may need to prepare the following:
- A business plan
- Expense sheet
- Financial projections for the next five years
The documents can give you an idea of how much you will need to loan. They also show the lending institution that they are making the right choice by giving you a loan.
Once you have the necessary documents, reach out to banks and credit unions and apply for a loan. You may want to compare offers so you can end up with the best possible terms for your loan.
Join Business Incubators or Accelerators
Early-stage companies can join incubator and accelerator programs to get funding. These programs are available in almost every major city, helping new businesses.
Incubators nurture businesses by offering shelter tools, training, and network. Meanwhile, accelerators help companies to take giant leaps to grow profits.
The programs can take from four to eight months to complete. This means they need a time commitment from business owners.
That said, incubators and accelerators are good opportunities to make connections. You can meet mentors, investors, and other startups owners.
Enter Local Contests
You can enter Shark Tank-style competitions where they giveaway prize money. These competitions can be an opportunity to practice your pitch for investors.
With competitions, you would not lose anything but the time you spent. And even if you do not win, you can still use the competition to spread brand awareness.
Crowdfunding can be a simple but effective way to get funding for a business from many people. Crowdfunders are not investors, and they do not expect a financial return on their money.
Instead, crowdfunders want gifts from your business in return for their contribution. Gifts can be the product you plan to sell.
You may even give other special perks, like crediting the crowdfunders through a special post.
Crowdfunding is a favorite option for people who produce creative works. And, it can even be effective for those selling a physical product.
It is also popular because it’s a low-risk option for business owners. Crowdfunding allows owners to keep complete control of the company. Owners are also under no obligation to repay their crowdfunders.
These are some of the funding avenues you can try for your startup. With a solid business plan, the funding options can ensure a good start for your firm.