How to Get Funding for Your New Business
It is no secret that in order to make money, you have to have some sort of capital to invest. Small business owners and entrepreneurs looking to start their own business know this better than most, and finding ways to fund their vision can be frustrating. Below is a list of five ways to find funding for your small business.
Using your personal finances is best when you are still formulating ideas and are in the experimental stage, so that, should your project fail, you do not fall into debt, owing money to third parties. Use these funds wisely and carefully, so that you do not bankrupt yourself before your idea has fully gotten off the ground.
Friends and Family
If you do not have adequate personal funds, whether through a lack of personal savings or simply needing more than your savings can cover, consider inviting friends and family to become investors in your company, with the full understanding that they may not necessarily see returns on those investments. A no strings attached grant is usually the best way for both parties to view this arrangement, though if the enterprise succeeds, it is the most ethical decision to return their initial grant with added rewards.
Websites such as Kickstarter, GoFundMe, Indieogo, and many others have successfully funded hundreds, if not thousands of small business ventures through the promotion of products to wide audiences of small investors all over the world. Crowdfunding is the best option for small businesses who have not qualified for a bank loan or are too small for venture capital funding.
If your business is starting to see steady revenue, it may be time to approach affluent individuals or groups known as angel investors. These investors provide capital to startups and small businesses in exchange for ownership equity or convertible debt. Angel investors are very serious about their investments and ownership, and expect high quality work that gets solid financial results.
Bank Loans and Venture Capital
Once your business has been successfully operating for several years, approaching financial institutions for loans is the next logical step for funding long-term growth. These institutions often require several years' worth of financial information and significant collateral to ensure best practice. If your business is growing faster than a bank loan will allow, a venture capitalist will, if they determine that your business to be viable to their interests, be able to provide very large amounts of capital with the eventual goal of selling your business for a significant financial return.