Funding options for a start-up

funding-option

All funding sources aim to make money off your business idea and you need funding to turn your business idea into a profitable business. The trade-off is quite simple but the challenge is to meet the right funding partner, here are your options.

1. Get loans from banks

Did you know that 15% of entrepreneurs fund their businesses with start-up business loans from banks? Why? Because banks are both highly approachable and cheap. Join those 15%. You will easily find support for your business proposal there. Sure, you’ll also find that the eligibility criteria for a small business loan are not always easy to meet and that the turnarounds may vary from weeks to months, but don’t let that discourage you. Keep this funding possibility in mind when you make your business plan. Go to websites like http://smallb.in/, if your business is based in India, and you’ll find a wealth of information. Every country has a business loan portal, you should go after them.

Moreover, you should also be on a lookout for small business grants and schemes offered by your government, who knows, you might hit a jackpot.

2. Get secured and unsecured business loans from other institutions

Of course, you can also seek funding for a lean start-up from other institutions, not just banks. They are more lenient with their eligibility criteria but obviously charge a much higher rate than banks.

3. Try venture capitalists

Taking a loan could be stressful so you might want to share the business risk with the investor. This is where venture capitalists (VCs) enter. But carefully consider the following before you choose them as your partners.

The purpose

Do you want their money? or do you want their assistance too? Don’t go to a venture capitalist if you’re only after the money.

The people

VCs spend a lot of time understanding you as an entrepreneur – your professional background, your personality, your confidence, your attitude etc. You’ll hear a lot of them saying that they invest in entrepreneurs and not in business ideas. You should do the same. Do a background check of your potential investors. Do you find people who have prior experience in entrepreneurship or are they just investors? Do you really feel they can offer you sound advice? You need to careful here, remember you’re actually selecting a business partner for your business idea.

The market

VCs target a number of markets, but if you analyze their portfolio carefully you can identify their primary target markets. So if youR business ideas target a similar market, you’ve found a match.

The response

There is no point in having a heavy-weight VC by your side, if they cannot spare the time for your business. Remember, VC may not share the same passion for your business idea as you do and they may have their hands tied with other ventures. So responsiveness is also an important consideration.

3. Angel investors

Speaking of investors, you might be familiar with angel investors. In case you’re not, they are somewhere between venture capitalists and bootstrapping. Are you acquainted to your angel investor? Do you know them? Do you have any connection with them? If you don’t, use the same filters as for venture capitalists. If you do, put them in the bootstrapping category.

4. Bootstrapping

This is about funding own business with your own money. This is only possible if you’ve matched your resources with the business idea. Often, this could be the best strategy to start off. Otherwise you’ll be spending a lot of time making business proposals to investors.

Entrepreneurship is not about making money. It is an experience. Why do you want to share this experience with someone else? You have all the time in the World to fail, learn, reinvent and kick back. Begin your journey by yourself to the extent possible and when you do need to bring an investor you’ll have better bargaining power.

5. Try accelerators and incubators

And finally, you have accelerators and incubators. If you already have a business that hasn’t proven profitable yet, accelerators can help you out. If you’ve just drawn the business plan , then incubators can be a good option. Think of it this way. The infrastructure, guidance, development strategies and technological means your business needs – these two can provide them all. But finding the right one is a challenge and it may restrict your business to the boundaries of their facility.

Now that you know how all funding sources work, you can choose the best one for your business idea based on your perspective, strategies and resources.

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