According to studies, the majority of new businesses fail during their first years in operation. One of the common reasons is lack of enough funding. Indeed, in any business, money is the bloodline. Capital is needed to generate business. That is the reason why in almost any stage, entrepreneurs are faced with ways on how can they finance their startup.
The type of funding that you require will depend on the type and nature of your business. As soon as you have realized the need to raise a fund, the article below are some of the choices that you can try:
One of the many ways to get working business funding is through bootstrapping. Self-funding is also known as bootstrapping. This is an effective way to finance any startup, especially if you’re just starting your journey. For first-timers, they are often faced with challenges on getting funds without having a plan or traction for success. To start, you can invest in using your own savings. On the other hand, you can ask friends or family to contribute.
It’s easier to raise money in this way since there is less compliance or formalities. Also, there is a lesser cost to fund-raising. In some instances, friends and family members are flexible with the interest rate. Thus, every entrepreneur must consider bootstrapping as a good funding option due to its various advantages.
Lately, crowdfunding has been gaining lots of attention in funding a startup. It works by receiving a contribution, loan, investment, or pre-order from more than one person all at the same time.
First, an entrepreneur will create a detailed business plan and put it in a crowdfunding platform. Then, he will include the business goals, plans on how to make a profit, how much funding the business needs, and other details on the platform. Next, the consumers will read the business details and give money if they like the proposal.
Those interested in the business plan will make pledges, give money, or make a pre-order. Anyone can contribute money on the business, which they understand and believe in.
With crowdfunding, it can generate interest and help in marketing the business. Just remember, there is lots of competition with crowdfunding. Thus, make sure that your business plan is rock solid to gain people’s attention.
Angel investors are those who have cash and have an interest in helping startups. They work in groups that screen proposals before investing their money on it. Some angel investors offer mentorship alongside giving capital to the entrepreneur.
Angel investors have funded many popular companies like Alibaba, Yahoo, and Google. This can occur at the early stage of growth of a company. The investors would usually expect around 30% of equity.
Indeed, there are many ways to get working capital funding. However, you can approach the banks to finance your business. You can inquire for the working capital or funding loan. Meanwhile, you can also try microfinance loans for your business, which are good for those with no access to traditional banking services. This one is becoming popular today, especially for those with limited requirements and their credit ratings are not favored by the banks.