What is the most important thing that you need to run or develop your business successfully? A positive cash flow is correct. With fierce competition, it is tough for a business to survive without proper funding. Forbes tell us that around 90% startups close within the first year and it has a lot to do with the cash flow.
Often, you need the funding in the initial stage more than later as this is the growth stage. In this article, we are going to look at 10 sources you can use to get funds for your dream business.
1. Self Funding
The best method to fund your business is to self fund it. Even if you have to wait a few years to get things started, this is still a good idea. This way, you will not have to sell a percent of your business to someone and only you will be liable for everything that happens to the business.
Even if you lose money in your business, this will be your money and nobody else will be affected for your decisions.
Self-funding can involve you using or selling your personal assets to gather cash to fund your goal. They can range from homes to personal jewelry to one’s bank account. You can also borrow against the equity in your property or take a loan. If you have sufficient collateral property with you, you are eligible to take a loan for your business.
2. Friends & Family
Friends and family are a good place to source your seed money from. They are the ones who believe in you and it is most likely that they will offer money to you to pursue your dream. Even if you are taking money from your friends or family, make sure that you either promise them to return the fund with some additional benefits or give them a percent of your business if they are interested.
A loan is one of the most traditional methods of receiving funds for your business. Any good bank will offer you a certain amount of loan if you have a good business plan and backup properties to assure the bank that you will pay the amount back.
It is not a good idea to get loans at the early stage of your business unless you prove the model first. This might cause problems for you later on.
4. Line of Credit
At times, the banks or the financial institutions will not offer you a loan immediately. On the other hand, they will offer you something that is known as the line of credit. Line of credit works in a very simple way. When you have an order (mostly known as PO or purchase order), you get access to the fund that were setup for you.
The negative part of this is that if you do not have an order for you, you do not get the amount. That means that you do not get your line of credit for your marketing or other expenses.
There are grant commissions these days that will allow you to get funds based on your business plans. When you are looking for a grant, the only thing that you need to focus on is a good business plan. If possible, make sure that you get a working prototype ready to show the grant commission that your business is worth granting for.
The chances of getting fund to improve when you have a goal to serve the world in your business plan. Grant commissions like those plans better than anything else.
6. Angel Investment
Angel investment is a lot like venture capitalism with some minor differences. The main difference is that the angel investor is generally a person instead of being a company. The other difference is that the investor will most likely not get involved in the operations of your business.
Therefore, if you are looking for something more than straight money, angel investment might not be the right option for you. On the other hand, if you just want the fund and nothing else from someone, this is the perfect option to go to. The reason that they are known as angel investors is simple. They do not get involved into the business decisions and let you do everything on your own.
If you do not have money to start or develop your business, you can simply look for a partner who will pay you for a certain percentage of the share of your business. This has been a proven model since a very long time. The idea is simple. Though it is your brain child, you will need capital and the person who is offering you the capital will take a certain percentage of your company as a partner.
Now, there are different terminologies that you can apply to the deal. Some will take a percentage for an amount of money. Some will like to take royalty fees depending on your sales. Make sure that you are using a good lawyer when you are forming a partnership.
8. Venture Capital
Venture capitals are now very popular among startup owners. Venture capital is a company who takes a percentage of your business for a fixed amount of money. Most venture capital will take around 49% of your business and work as a silent partner. Some will give you the option to buy back your company later on with an interest fee where the others will not allow you to do so.
Make sure that you understand all the terms perfectly before getting into a deal.
Crowdsourcing platforms such as Kickstarter or Indegogo are also a good place to seek your initial funding from. Simply talk about your business on one of the crowdsourcing platforms and ask your audience to give you the seed funding. The platform takes care of most of the hustles for you. You can promote the crowd sourcing campaign to your friends and family too.
The best part about crowdsourcing is that the money add up to be huge.
If you have a good business plan, competitions can be a good place to seek your fund from. As this era is known as the era of entrepreneurship, there are lots of competitions happening all around the globe backed by different businesses. You can submit your application to some of these competitions and if you are on the list of winners, you will get a good amount of money.
These are just some of the most common ways to get closer to your dream and many people have already reached momentous success with these steps. If you can think of some alternative methods to fund your business, let us know in the comments below.
You can find more inspiration to reach your goal with the History of Corporate Finance In a Nutshell online course. The course comes with 2 hours of video that covers 9 sections and details the history of the financial sector. It involves courses like risks and diversification, history of finance, mergers, and acquisitions and much more.