Are you looking for financing for your startup? Well, it can be quite confusing where to source financing especially when you are new in the business. Thankfully, there are many sources out there that you can consider including payday loans, your own savings, and other investors among others.
That being said, here are some financing sources to consider.
Before looking for external funding, it is good to first look within. What can you as the founders bring to the table to get the business off the ground? Personal savings can be a good place to start.
But, it doesn’t have to be in form of cash. For instance, you can opt not to pay yourself for some time. The advantage of funding the business yourself is that it shows your commitment to the venture. This creates a positive impression for external investors, which raises the likelihood of investing in your business.
Friends and family
Another option to consider is asking your friends and family to fund your business. These are people close to you who believe in your idea. This makes it easy and quick to access this type of funding.
However, it is important to draw an agreement on how you are going to repay the money to avoid conflicts down the line. Keep in mind that some people might ask for a share in your business. So, it is important to be sure that you would want such kind of partnership before you sign.
Approaching your bank for a loan is another option that you have. The good thing is that banks don’t ask for a part of your business in exchange for loans. However, keep in mind that they ask for collateral or proof of creditworthiness.
If you are in a position to get one, a bank loan can be a good option for you. You can also consider a bank if you are looking for asset financing to purchase equipment or machines.
These are investors who give funding to startups in exchange for equity in the business. In addition, they expect a high return on investment from their funding.
Another thing to keep in mind is that venture capitalists tend to only work with businesses that show high growth potential. If you are in sectors such as communications, IT, biotechnology, and such, approaching venture capitalists can be a good option for you.
This is ideally refers to doing fundraising from the public. You could ask people to make small contributions towards your business in exchange for small amounts of equity in the business. In this type of financing, you can choose between equity crowdfunding, debt crowdfunding, or donation-based crowdfunding.
If you are finding trouble with where to turn when searching for financing for your business, you have different options to consider. However, you need to keep in mind that different sources come with different specific demands. Most importantly, consider the amount that you need, your type of business, and when you need the money.