Your capacity to get sufficient capital to start and expand your
firm, no matter how brilliant your business idea is, is critical to startup
success. Besides a solid business plan, funding is one of the most significant
aspects of operating a company.
In this post, we'll look at five ways to get startup money for your business and offer financing advice to make your small business idea a reality.
1. Angel Financing
An angel investor is a person who invests in a firm or a business startup in exchange for convertible debt or equity in the company. Angel investors should not be confused with venture capitalists (VCs), typically large, established organizations that invest in a company in exchange for stock.
Angel investors typically fund startups in their early stages when most other investors are hesitant to back them, especially if they do not have the growth record that a VC seeks. Angel investments typically range from $25,000 to $100,000 per startup, although they can go much higher. Finding an angel investor is similar to obtaining investment from a venture capital firm but on a more personal level.
Perhaps your friend or colleague can introduce you to an angel investor, so check LinkedIn to see who you already have connections with. Angel investors are considerably more inclined to invest if they are familiar with your industry; therefore, starting with your contacts in that field is typically a good idea.
2. Crowdfunding
Crowdfunding is the method of raising money through popular
crowdfunding platforms like Kickstarter and Indiegogo to give your company a
financial boost. There's no financing source in crowdfunding; crowdfunding
platforms pool small investments from multiple investors. Through crowdfunding,
you can generate beginning capital for your business and allocate funds for
promoting your company's products or services.
A crowdfunding campaign can also help you develop a community of
interested individuals in your company or products.
To start a crowdfunding campaign, you need to create a profile
on a crowdfunding website outlining your firm, its operations, and the amount
of money you want to raise. Interested contributors can donate to your
campaign. In return, you could offer a reward, whether one of your products or
services, a discount depending on the amount donated, some other perk), or a
piece of your company's equity or profit share.
Equity crowdfunding or selling stock in your firm in exchange
for cash should be done with an experienced lawyer's assistance, as legal
requirements are necessary.
3. Invoice Financing or Factoring
A service provider advances you the money on your outstanding
accounts receivables using invoice finance. Also known as factoring, this type
of funding involves reimbursing the loan provider once the customer settles the
bill. By using invoice financing services, your firm will have the cash flow to
continue operating while you wait for customers' payments on their outstanding
invoices.
4. Partner Financing
Partner financing is another funding option that's worth
exploring. Here, you partner with a firm – usually, an established corporation
– to fund your company and give your partner special access to your product,
distribution rights, share from a sale, or some combination of those items.
Your financing partner may be in a similar industry or with a stake in your
company.
5. Small Business Credit Cards
Several credit card issuers specifically cater to the small
business market, offering special benefits such as cashback rewards, airline
mileage points, and other perks.
Some issuers would tie the business credit card to your credit
score and credit history and require a guarantee from you as the business
owner. Just note that any defaults or late payments on the business credit card
would affect your credit rating. You can apply for a small company credit card
at your bank or online.
In A Nutshell
Finding funding for your startup can quickly become a full-time
job. Startup owners should be aware that raising startup finance is never
simple and frequently takes longer than expected.
While many people start their businesses with their own money or
with money borrowed from family or friends, you have numerous options out
there.
You may take critical steps toward funding your firm by delivering a pitch to the proper investors. Please make no mistake: it will be challenging, but knowing where and what business solutions to look for can put you in a good position to succeed.
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