Efficient Ways of Financing a Startup
Regardless of how great and unique your business idea is, your ability to acquire the necessary funding to start and grow your small business is the most crucial aspect of startup success. And while some individuals might find using their own capital for financing their companies to be the best solution, this simply isn't a viable and sustainable option for most small business owners. Instead, startup founders need to find different ways of financing their businesses, and here are some of the best, most efficient methods:
Consider small business loans
Various traditional and alternative financial institutions offer small business loans nowadays. These loans give your startup the opportunity to grow, fund development and research, expand to new areas, improve marketing efforts and sales, and hire a larger workforce, among other benefits. The types of available small business loans are quite broad as well, including lines of credit, receivable financing, working capital loans, term loans, equipment loans, etc.
The exact loan you select will likely depend on the needs of your startup, the loan length, and the specific loan terms. Regardless of the option you choose, keep in mind that small business loans are often difficult to qualify for, and they might require some form of collateral or guarantee many startups won’t be able to provide.
Try to find an angel investor
Angel investors are most commonly people who invest in startups during their early stages, often by getting equity ownership interest in exchange. Some of the largest enterprises like Facebook and Uber have grown thanks to angel investors, as these individuals typically look for clear business plans, great market opportunities, unique ideas, as well as commitment and passion of startup founders.
What’s more, good angel investors are much simpler to find than before. From social media like LinkedIn and angel investor networks to bankers, accountants, lawyers, and other entrepreneurs, startup founders can now easily find angel investors through the connections they’ve already made, allowing them to easily build and grow their small businesses.
Choose Trade Finance options
If your startup deals in importing and exporting, your capital might often be tied up in unpaid invoices, or you might simply need additional security when trading with international suppliers. In those instances, finding a great Trade Finance solution is one of the best decisions you could make for your small business.
By providing you with a continuous line of credit, Trade Financing enables you to pay both local and international suppliers without any cash flow issues. This solution will also allow you to set your own trading terms, thus giving you the opportunity to close your working capital gap and the flexibility to diversify your funding. By helping you maintain great relationships with worldwide partners, Trade Finance might also empower you to grow, expand, and go global.
Turn to friends and family
Borrowing money from friends and family members, if possible, is one of the most common ways of funding a startup. Convincing banks and investors of the quality and the marketability of your business idea can often be difficult, which is why many entrepreneurs turn to those closest to them, who are often much more willing to help.
However, this financing option can also be quite a slippery slope, as borrowing money from friends and family, as well those who can’t afford to lose it, can sometimes destroy important relationships. That is why it’s always advised to get sound legal advice for all parties involved before taking money from your friends and family as a loan.
Go for crowdfunding solutions
In case you don’t want to borrow money from your friends and family, but more traditional lending options aren’t working out either, crowdfunding can be a great compromise. This practice involves raising funds through a number of different funders, usually using crowdfunding websites like Kickstarter and GoFundMe.
While each crowdfunding website is different, offering unique rewards and requiring different fees, one aspect is always the same. As long as you have a great business idea, a solid business plan, as well as an interesting brand story that will engage an audience, chances are high you will attract enough individuals to invest in your startup and gather the necessary funds.
Financing a startup is never an easy task, particularly today when the number of small businesses is higher than ever. Hopefully, the financing options mentioned above will allow you to find the best solution for your business, giving you the opportunity to grow and reach success.
If you wish to invest yourself, you should know about Propel(x), an investment marketplace that gives investors the power to discover and invest in visionary science and technology startups.