You and I know that among the greatest obstacles for start-ups and small businesses is raising funds necessary to start their companies. It’s simply not enough to produce a great business idea, if you truly wish to go self-employed, then you must find a way to finance your business.
This article discusses the various options to consider when seeking to raise more cash for your start-up and looks into how you can save cash.
Bootstrapping: fund it yourself
Self-funding, better known as bootstrapping, lets you use your financial capital to finance your business. You maintain full control over the company with self-funding, but you carry on all the burden yourself as well. Be careful not to invest more than you can spare and be very cautious not to leave yourself in debt or being tempted into using vital savings, such as your pension.
Venture capitalists are professional investors who spend large amounts of money in other businesses to make a profit on their investments. Unfortunately, venture funding is only available at the early stage to increasingly innovative firms working in areas such as life science and biotech.
The potential drawback to venture capital is that it’s not easy to access, and in the event that the business goes bankrupt, they will take possession of the company.
Consider friends and family
It may sound like an intimidating proposition to ask your friends and family regarding money, but tapping people nearest to you is always a successful first move to getting external support. And yeah, asking can’t hurt. A family member might not be able to fund your entire business, but the person may get impressed enough to help you get a little cash.
Angel investors are people that invest in start-up businesses; usually early-stage entrepreneurs. The difference between friends and family and more structured venture capital firms is filled by Angel investors. Many Angel investors simply invest for profit.
Let’s take the investment debate on “friends and family” up a notch or two. If you’ve not heard about crowdfunding, you’ve probably been living under a rock.
It operates by participating in (or donating to) crowdfunding projects in exchange for a possible benefit or reward from individuals or organizations. It can be dangerous to invest in this way, so make sure you know what you’re doing.
Government grants are intended to support start-up businesses in specified economic fields. They are perfect when you need a cash injection to get started.
The big bonus of grants is that you don’t have to pay back the money, so you completely own your business. However, each grant has specific conditions for the organizations they can fund, so review them carefully before applying.
If you have these financing strategies in mind and create a business plan that shows the importance of investing in your business, you can dramatically improve the likelihood of attracting the money you need, regardless of the stage of your project.