Every year, thousands of people start a business of their own. And nearly all startup businesses usually start with the investors’ confidence and the entrepreneurs’ high hopes. However, the probability of success is as small as the hole of a needle. By that we mean, the survival rate of a startup business is low.
According to the in-depth research carried out by experts, startup businesses within the first year of launching usually fail due to numerous reasons, including the insufficient capital. Keep in mind that the primary requirement for any startups to flourish is adequate capital. Otherwise, startup businesses will likely collapse.
Before your startup business can become profitable, you must look for a way to finance its emergence. There is a myriad of capital options for startup businesses out there. All you have to do is to choose the right one. For a little help, check out the five sources of financing for startup businesses.
Use Existing Resources
For a startup business to succeed, you must make sure that you have got some reserved cash that you can access without difficulty. Or you can ask your family and friends to lend you some funds. This method of funding from family and friends or using saved up cash is widely known as self-funding or bootstrapping.
Know that obtaining money from your friends and family is an excellent way to launch your startup. Family and friends are, for the most part, flexible and responsive when it comes to supporting your loan debt besides other external sources.
Therefore, if you talk to the right family member or friend that finance your intention, you can certainly get some money. Otherwise all the funds you need to start your business. However, take note that bootstrapping or self-funding does not relatively work for large-scale enterprises. Remember that it only works for small-scale ventures.
Crowdfunding
Believe it or not, twenty-first-century technology has made it effortless for startup entrepreneurs to open up their financial dilemma on a responsive social media platform. For the most part, crowdfunding platforms, designed for entrepreneurs to share their business challenges or ideas to an association of investors willing to finance their cause or plans, are one of the best sources to fund your enterprise.
So, how does this platform works? In most cases, a person shares his or her business idea on the crowdfunding platform. An individual shares his or her business model and its probable growth.
If the crowd funders liked and procured your idea, they would pledge to finance your business model openly and provide funds respectively. Delving into this capital option builds public interest for your enterprise doing some free marketing and at the same time giving finance for your startup.
Moreover, crowdfunding also eradicates the complications involved in putting your startup business in the control of a broker or an investor. However, it can be hard to attract crowd funders towards you because there are hundreds of people pitching the similar business model of yours. As a result, there’s a high possibility that your idea will get rejected or overlooked.
Angel Investments
Another excellent way to raise capital for your business is by seeking angel investments. You may wonder if there are such things as Angel investor or Angel investment? Of course, there is such thing.
So that you know, angel investors are those individuals or investors with a hefty amount of money and are more than ready to invest it in unique business ideas. These individuals, popularly known as Angel investors, usually convene to examine various business ideas and to choose the best candidate to invest their money.
Aside from financing your startup business, Angel investors also provide mentorship, and they are more than willing to take risks as they expect for a high return on investment. However, they usually offer lower investment capital than venture capitalists.
Venture Capitalists
Venture capital funds are, for the most part, handled by professionals that concentrate on looking for companies with tremendous prospects. Their manner of operating includes them investing in a stable and robust business instead of equity.
Once there’s an acquisition or initial public offerings (IPO) of the business they collaborated with, they then withdraw and look for other investments. Like the Angel investors, venture capitalists offer mentorship and share their expertise with you, helping you sustain your business effectively.
However, you as the entrepreneur tend to lose the authority of your business because you are surrendering a large part of your company to venture capitalists. To help you more about this capital option, seek advice from any financial firms such as Ashe Morgan.
Bank Loans
Banking organizations offer financial loans to entrepreneurs who ask for their help together with a stable and robust business plan. Keep in mind that the business plan should be, for the most part, well-structured to act under their manner of operating, approximated time of maturity, and profit forecast.
There are two forms of bank loans – funding and working capital loan. The latter is a type of loan intended to cross over one full revolution of revenue generation. On the other hand, funding is the process of creating the business model and brief information of the valuation, as well as the report for which you acquired the loan.
Takeaway
The salient need for startup businesses to grow and prosper is adequate capital. Sure, almost anyone can build a company, establish a Facebook page, and create a website. However, a company’s success is not only determined by its sales, but also the capital and funding behind the enterprise.
If you’re planning to launch a business today, make sure that you have an adequate capital to ensure, at the very least, the success of your business. Read the capital options above to know different financial platforms that will suit your need and your startup business as well.
