Sure, starting a small business can be an excellent first step in beginning your entrepreneurial journey. But that does not mean that your business idea can materialize for free.
The thing is, all small businesses and startups need money, to begin with. These funds are what can help the business to operate and prove its salt until it becomes profitable. Sufficient fund is also needed if you want to expand your business.
Thus, you need to find different ways to fund your business. Here are the nine funding options that you can do to raise enough capital for your small business:
Bootstrapping
When first getting started, a lot of entrepreneurs are using “bootstrapping.” This is where you’ll be financing your company by collecting all the personal funds that you can find.
This includes your savings, credit cards, or home equity funds that you might have. In many cases, using the money you have rather than borrowing or raising funds is a good approach.
Many entrepreneurs use bootstrapping until they have a profitable business. This is also advantageous on your part because you’re not stuck with monthly payments or large loans that will weigh you down.
But if you want to grow your business quickly, it can be beneficial on your part to bring in some outside sources of funding. This will mostly depend on what type of business you want to start.
Angel Investors
Traditionally, angels are thought of as startup backers and are pretty similar to venture capitalists. That’s why many people start to confuse them. However, they have their own set of differences.
For instance, venture capitalists are made up of a large group of companies. On the other hand, angels are composed of individual investors who’ll likely invest in startups, especially in the early stages.
Usually, angels have the right economic resources, bringing in money and advice for entrepreneurs. This is a type of financing method that is more personal.
Generally, angels can invest anywhere between $10,000, up to millions of dollars.
In exchange for the money they invest, they hold the right to supervise your company’s management practices. This may be a seat with the board of directors or assurance of transparency on your part.
Venture Capitalists
Similar to angel investors, venture capitalists will take equity in your company in exchange for financing.
Venture capital funds will look like mutual funds in which money is collected from several investors.
Usually, venture capitalists like Biospring Partners (co-founded by Michelle Dipp and Jennifer Lum) are comprised of people who are experts in the field. It’s just that they chose to be activators and accelerators to help aspiring entrepreneurs turn their ideas into reality.
In exchange for a large amount of money they invest, you might have to give up some control and equity.
Crowdfunding
Lately, crowdfunding has been gaining a lot of traction. How it works is that an entrepreneur will post details about their startup on a crowdfunding platform. From there, people will send money to help you achieve your initial funding needs.
Here, you need to mention your goals, how you plan to make a profit with your business, how much funding you need, the reasons you need that funding, and so on.
Then, people will get to read about your business and pitch in money if they like your idea. Those people who will donate the money will pay an online pledge to pre-buy a product or donate.
Anyone can pitch in giving money in helping a business or a cause that they believe in.
Grants
Getting grants is usually tricky. That’s because there’s a lot of competition out there, and the criteria for getting awards are often stringent.
Usually, most grants will require you to match the funds that you’re given, and the amount will usually vary, depending on who the granter is.
Apart from that, you should meet federal research or development goals to be a grant recipient.
Microloans
Microloans are business loans in smaller amounts. You can apply for microloans from tech-driven lending companies. These are companies that leverage fintech to accept, review, and grant loan applications.
Although there are limitations on how much you can loan, microloans can be an ideal option if all you need is a little nudge. For instance, you have to buy a piece of new equipment; a microloan can help.
Invoice Financing
Invoice financing, aka factoring, provides funds based on your outstanding accounts receivable. You’ll usually get to repay this after the customer receives the bill.
This way, your business will be getting the cash inflow that it needs to keep on running. This is while you wait for your customers to pay for any outstanding invoices they might have.
Startup Incubators
If you have a good idea but need help, especially in the funding and guidance department, looking up startup incubators can be a fantastic option.
Business incubators are precisely what their name suggests. These are organizations that provide services and support to fledgling companies.
Business incubators are often run by government agencies, venture capital firms, and universities. Their goal is to nurture early-stage startups through financial assistance, mentoring, and networking.
Pitch Competitions
Are you looking for a fun way to earn capital for your business? Why not try to pitch your idea in competitions?
Doing so gives you the platform to pitch in your products to a large pool of investors and partners. It also takes a lot less effort on your part to schedule a one-on-one meeting with them.
Just because you do not have enough savings to start a business does not mean you can no longer be an entrepreneur. Refer to the list of financing methods above to help turn your business idea into reality. Good luck!
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