If you’re a startup, there is nothing surprising in facing teething troubles. But none of these challenges or troubles is as big or critical as funding your business. That means finding investment to get your business off the ground is, without a doubt a daunting task. From production space, buying goods to renting office, and hiring staff, turning a simple idea into a business practically requires funds and money.
Unless you are wealthy enough to finance
your business or your benevolent relative has left you a lot of money, you
probably have to find ways to fund your business. Luckily, there are some smart ways you can
resolve this problem. Here are some of those unique ways to help you fund your
How Can You Fund Your Small Business?
the easiest way to find your business enough funds is crowdfunding- which is a
practice of raising funds from different forums or people. It is an alternative finance and a kind of
crowd sourcing. Luckily, there are
plenty of crowdfunding options available for you right on the internet.
asking for investment funds for your businesses from a variety of investors, it
is highly recommended to come up with an impressive pitch. The success of your
crowdfunding campaign depends more on how you pitch the idea than it does on
the idea itself. Of course, you need a team with you to plan out your
common reason why startups choose this method of funding is because of the
flexibility of options. Venture capitals are known for being strict with their
investments. They will demand more equity in your business than you will ever
have to offer through a crowdfunding model. They usually focus more on their
returns than the success of the startup. The situation is quite the opposite
when you go with the crowdfunding option.
2. Angel Investors
Angel Investors is no doubt one of the unique funding options among all as they are always looking for innovative ideas to invest in the business. Originally business giants like Yahoo and Google were also used this funding option. It is worth noting that taking funds from Angel Investors requires entrepreneurs to give them some equity share in the company.
Small Business Loans (SBA)
This funding option is a result
of the U.S government’s interest in rampant growth of the small business
industry. The s Small Business
Administration, in this regard, offers a wide range of loan types and business
investments to help business owners get started. Exploring the SBA loan options is a great way
to kick start your business, if intend to run an educational institute or non-profits
set-up. For easy funding, you might want to request
for SBA grants.
Much like angel investors, the
funding option invest money in up-and-coming- businesses that have high
potential to not only grow but also monetary returns. In addition to that, Venture Capitalist looks
for equity share in the business it invests money in. The investors are also
interested in getting a right in company’s directorial decisions. In short, VCs make money through their
investments and consider having some control or authority in the business is
the best way to do that. It is always
better to investigate this funding option thoroughly before opting it.
Reserved specifically for small non-profit
businesses, finance institutions grant microloans to entrepreneurs who don’t
qualify for a bank loans. Microloan organizations, instead of giving donations
to the non-profit companies allow entrepreneurs to invest in various economic
opportunities. Microloans are also a
popular financing option in developing nations.
There is no denying that investing in a startup entails a lot of risks and these risks are what prevent traditional lenders from giving loans to business owners. This becomes even more skeptical if business owner doesn’t invest his/her own money in the startup.
Purchase Order Financing
There is an array of factors that affect the
cash flows of any business. These factors may include supply and demand and
seasonality. For examples, sometimes a
company is unable to complete the orders due to fewer funds to buys inventory
and material to make the products.
In situations like these,
purchase order financing can be the panacea to the problems. It helps companies
extend advance to purchase material they need to make products. Purchase order
financing collect back money when products are sold. If your business deals in manufactured goods,
it stands a chance to makes 20% more on its sales by opting purchase order
If your bill
payment record is contingent on your product selling record, you may take the
benefits by negotiating longer payment terms with the vendors. Vendors, typically require payments on invoices
within thirty days before imposing penalties and late fees. Negotiating longer payment terms will allow
you work with more cash in the interim.
This is even more
important if your business has a longer sales cycle than thirty days. That means
if sales cycle takes forty to forty-five
days from purchasing to selling goods,
you will not be able to make invoices payment within a month. In that case, you need negotiations to avail
vendor financing to benefit your sales cycle.
In a nutshell, investments and business funding are of paramount importance no matter what industry you want to get into. If you lack sufficient finances, it is important to weigh all options you can choose to give a kick start your business. Given that, the mentioned funding options are great to consider if they suit your requirements.
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