When you have an idea for a company and have done all the necessary research to make an informed decision and reasonable assumption that your idea is viable, the next step is to implement a plan to develop, startup and grow your Business. This means you must have the capital. There are several different ways in which an aspiring entrepreneur can get the necessary funding to build or grow their business venture. Listed below are some of the methods and resources that can be utilized to acquire startup funding.
This term refers to financing your startup with you own cash on hand. Your startup funding may be acquired from money you have saved, or it could be from profits earned from previous startups. Bootstrapping has the advantage of not having to pay back any loans and interest, but it can also cost you significant savings if you don’t keep careful track of spending or your startup fails.
Entrepreneur’s best chances of finding investors in the business idea is to network. Use social networking sites, attend networking functions and events, talk to people you know who might know others. The advantage to having investors is that you can negotiate contract terms. The downside is that investors often feel that they have a say in how your business is going to be run. After all, they now have a high stake in the success of your business, and if they feel that you are handling things efficiently, they might want to pull out.
3. Family and Friends
Entrepreneurs often receive startup funding from family and friends. While this also eliminates the problem of having to immediately begin paying back the loan or building up interest, it can also cause potential problems down the road. Even though you have a different relationship with friends and family than you would a bank, you should still treat the loan in a professional manner and not expect to get away with paying them back at a later date than was previously expected. Borrowing money from friends and family has the potential to ruin the relationship.
4. Debt Financing
Banks and financial institutions are being more picky about who they give startup funding capital to these days. Your best chances for receiving a loan is to do your due diligence, and put together a well-written, well-researched report and business plan. The more you can show a bank about the future viability and potential success of your business idea, the more inclined they will be to grant you a loan.
Depending on the nature of your business venture, you may eligible for consideration for a grant. There is a lot of competition amongst entrepreneurs and startups to be awarded a grant, and most states have their own grants. You can also attempt to secure a grant through the Small Business Administrations Small Business Innovation Research (SBIR) Program. It is possible to receive a large sum of startup funds through a grant, but the negative aspect is that you are often only allowed to use the money according to strict guidelines.
6. Other Financing
There are several types of financing options available that will provide you with startup funding. Each type has their pros and cons, and you must decide if any one particular financing option is worth it for you or if you would be better off seeking capital elsewhere.
Series a financing is one type of option, in which venture capitalists often provide entrepreneurs with large sums of money that will help the individual further expand and grow a small business that is already showing strong signs of success. Equity financing is another type of financing that typically involves receiving funding from private investors who receive a percentage of the company in return.
When considering financing options, it is strongly suggested that you first consult with a legal expert that has sufficient experience in these matters.