January 3, 2017
Where to Find Funding for Your Startup
Entrepreneurship is one of the most challenging things people do in their entire life. From planning to validating the business, you have a lot to do as a new entrepreneur. In order to make all these things happen, you will need some cash. Gathering cash requires you to consider every option available. Here is a list of common ways to fund your business today.
Banks give loans to finance vehicles or any other important asset of the business. The repayment period usually takes between six months and seven years. You will be required to provide collateral to secure the loan. The collateral may be in the form of a blanket lien. A blanket lien gives the lender the rights to seize every asset and collateral you own in the event of nonpayment. The bank will require you to pay the processing fees and the interests for a given duration. Above all, you must have a good credit history to qualify for a business loan.
Credit Card or Line of Credit
You can use your business or personal credit card to pay for the startup costs. However, you need to be careful with credit cards. You don’t want to get yourself in financial trouble at a time when your business is still in its initial stages. Unless you have a credit card with a required limit and low interests, don’t use it as the primary source of funding for startup expenses. Another better option is to use a line of credit. It is an unsecured form of loan that allows you to access money whenever the need arises. Business lines of credit attract lower interests and are usually designed to be short-term loans.
Crowdfunding involves raising money from many people. It is estimated that over $34 billion of business capital come from crowdfunding. However, your business idea should stand out in order to benefit from crowdfunding. A good business idea must have a compelling story to catch people’s attention. You must share with the listeners what inspired you to create the concept. You must also show your passion to seeing the concept become a reality. There are several online sites that offer crowdfunding platforms to thousands of startups all over the world.
Business incubators provide financial support to startups in various stages of development. A business incubator will invite your startup to share its premises and resources. For example, an incubator can share its laboratory so that small businesses can test their products before they begin the production process. Incubators can also provide administrative and logistical assistance to small businesses. Once the product is ready for the market, the startup leaves the incubator to start production on its own. The incubation period usually last for two years.
Angels are rich individuals who like to invest in small companies owned by others. Most of them are retired executives who have a lot of experience and a network of contracts. Therefore, they not only bring financial reprieve to the business but they also provide technical assistance. Most angel investors prefer an initial investment that ranges between $25,000 and $100,000. In return, they have the rights to supervise the company’s management. This involves having a seat on the board of directors. Angel investors often prefer a low profile. However, there are some online platforms that provide a list of angels but at a small fee.
Venture capital allows you to bring someone else into the business as a partner. If you want to retain 100 percent control of your business, you should not consider this option. In most cases, you won’t get any share until all the partners have profited from the business. Venture capitalists take a strong position in the startup, especially for risky projects. This can involve giving some part of their ownership rights to a third party. If you are comfortable with this option, ensure you bring in people with experience and knowledge.
Small Business Administration (SBA)
Small Business Administration is a good alternative if you don’t qualify for a bank loan. SBAs are guaranteed by the government, and they are easy to get. Your business must be a sole proprietorship and profit-oriented. These loans allow you to make small payments for an extended period.