Jump starting your business is certainly difficult to tackle. While entrepreneurs in all stages of the business lifecycle are in constant financing crises, start-up owners need to work harder to bootstrap in order to get the business up and running. Knowing all the startup financing sources available is definitely mandatory when it comes to building a profitable business venture.
Below are some of the best start-up financing solutions that you can access to grow and develop your business.
1. Peer-to-peer Lending
Peer-to-peer lending is a very profitable financing idea. It is also known as crowd-lending, and it involves using a specialised platform where you ask peers for financing, without relying on banking institutions. People that use peer-to-peer lending platforms lend money to various startup campaigns and they also have a small ROI.
The amounts that you can get through this method start from $25 and go up to whatever amount people are willing to lend you. Online marketplaces for lending, including Prosper and Lending Club offer a reliable marketplace for peer-to-peer lending and allow borrowers to easily connect with lenders.
The only downside of this financing solution is the fact that it may not be as streamlined as borrowing money from a bank, since it relies entirely on local investors. Thus, the application and approval process might take longer.
2. Personal Investment
When starting your own business, you should start by thinking what can you do on your own finances-wise, not what banks can offer. Your first investor should be yourself, either with cash or with collateral on your assets. This will show potential investors and banking institutions, when necessary, that you’re in for the long run and not running a crude experiment that might endanger their investment in your business. Plus, you’re telling them that you’re ready to take risks and do everything in your capacity to make ends meet and make everything run smoothly.
Crowdfunding has gained more and more attention after it successfully managed to help so many small businesses achieve higher financial aid to grow bigger and more secure. The concept is a simple one and is mainly online-based.
There are two types of crowdfunding that you can choose: reward-based crowdfunding and equity-based. This is a great financing solution if used short-term. However, if you want to sustain your business in the long term, it will most likely be ineffective, and will prove to be an overall poor decision.
The best thing of all? This funding method will help you determine the market validation your company offers. This is a good variable you want to get a better insight into.
4. Angel Investors
Angel investors have all the necessary means to help entrepreneurs get the necessary financing to jump start their businesses or make further investments for their company. They are generally people or even retirees from the business industry or even CEOs. Their main goal is to invest directly in other firms owned by other people. Being more frequently than not seasoned specialists or experts in their fields, they are also able to supply small start-ups with insightful pieces of information on the industry.
They also have a large network that might contribute to boosting your company’s success chances. Angel investors usually invest more money than other sources, between $25,000 and $100,000. In exchange, they’ll ask for some management input. Meaning they will most likely demand a seat on the board of directors, which will limit your company’s flexibility. Thus, if you want to remain independent and run your business as you like, better to avoid this option.
5. Low-Interest Small Business Loans for Start-ups
Getting a small business loan with low interest might be just the perfect solution that you have if you’re looking for advantageous financing solutions for your business. Make sure to research the market and get in touch with a company able to provide low interest small business loans for startups. These establishments usually focus on helping their clients identify their financing needs and finding suitable products for those.
Using the services of a dedicated website will help you easily compare and connect with top business financing vendors in your area, which will turn out to be a better option than blindly searching for such institutions yourself. Make sure that you pay attention to all the requirements asked by each vendor and select the one that seems to be able to meet your financial needs.
6. Business Incubators
These incubators or accelerators usually focus on the tech and IT industry. They offer support and guidance to businesses in these industries that find themselves in different steps of the business lifecycle. In some cases, these incubators focus on entire areas, offering all businesses with the profile the necessary resources to grow and develop. This means that while you will have some advantages, you will also be in for quite some competition.
These incubators also focus on the sharing principle. This means that if you have a high-tech laboratory, you have to allow other businesses in the area to use it as well and take advantage of your facilities.
7. Government Grants
Various government agencies and institutions provide grants and subsidies that are targeted at various industries or sectors. Search on your national business network website and see which are those programs that might allow you to access grants or subsidies. However, getting a government grant can be incredibly difficult, not to mention lengthy process. The competition is atrocious and the selection criteria stringent.
Of course, you will have to meet certain criteria to be eligible for such grants and you may not even get the total amount that you’re searching for. To apply for a similar grant, you need to provide the following information:
- A detailed description of your project.
- A detailed explanation of the benefits of your project.
- A multitude of details and information regarding the relevant experience and background of all key managers of your project.
- A detailed work plan for your project.
Considering all the demands, this is a rather difficult financing source to consider for your business.
No type of funding above will apply to all types of businesses. It’s always best to do as much research as possible to determine the right funding that’s fit for your business and short and long term goals.