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5 POWERFUL TIPS For funding your business idea
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What are we talking about? Most entrepreneurs do not have the luxury of having millions in their bank account, especially not when you are starting out with a new business. You may be full of amazing ideas and powerful ways of implementing those ideas, but you need finance in order to be able to put those ideas into action and make a successful business out of it. Needless to say, this becomes one of the major challenges faced by upcoming entrepreneurs: finding funds for launching and expanding their start-up business.
Past & Present The process of funding was quite tedious and difficult in the olden days, but this is not the case now. Today, people are recognising the importance and advantages of start up business ventures. Start ups generate employment, create multi-skilled workforce, and increase the entrepreneurial spirit, leading to the strengthening of the country’s economy. There are many options available for the financing of a new business idea. However, figuring the source that suits your requirements and type of business in the best possible manner is a multifaceted process.
Let’s discuss 5 OF THE MOST RELIABLE SOURCES OF FUNDING A START-UP BUSINESS, apart from investing your own financial resources.
Crowd funding As the name suggests, crowd funding involves taking money from the public in the form of their private finances, by presenting your idea that needs funding. This method is swiftly gaining popularity. Crowd funding is a good option for financing a business idea as it offers not only funds but also visibility through a platform to showcase your business to the world. However, for this idea to work smoothly, it is important that you select like minded people to ask funds and commitment from. Also, there should be very clear knowledge and understanding of the business venture in the minds of the people. Some companies that have received crowd funding are Ouya (raised $8.6 million), Tile (raised $2.68 million), and Pirate3D (raised $1.44 million).
Angel Investor Investors lending money to start up businesses with the knowledge and will to recognize and accept risk as well as demand relatively low control and ownership equity in return. Usually, angel investors are established entrepreneurs that have made their fortune and eventually look at investing in new and innovative start ups. The benefit of having angel investors goes beyond the finance as these experienced entrepreneurs can give valuable business advice, guidance and connections. Some companies that received angel investing are Google, Facebook, Skype and Twitter.
Venture Capital It is a very common means of financing. Venture capitalists are private investors who provide funds to promising start ups. With this type of financing, budding entrepreneurs can acquire a hefty amount of capital. The main benefit of venture capital financing is the possibility for company growth and development that would otherwise not be likely through bank loans or other methods. Also, repayment to these investors isn't essentially a compulsion like it would be for a bank loan because venture capitalists look for ownership to implement control to counterbalance any high risks. Some of the companies that received venture capital are Facebook, Solyndra and Western Integrated Network amongst many others.
Friends and Family This comprises of money that is borrowed by an entrepreneur from his family members and/or close friends in order to help finance his start up business. Acquiring money from friends and family is the most common source of funds. The advantage of this type of funding is that such lenders are flexible with respect to the loan amount, time period and interest rate. This makes the financing process less complicated and tedious.
Bank Loans Availing a bank loan is another prominent source of getting funds. People opt for bank loans for all kinds of financial requirements. This is due to the fact that bank loans range within a wide bracket. Bank loans ensure a long term relationship between the bank and the firm which gives rise to the possibility of a smooth future correspondence between the two. As mentioned earlier, almost all the major businesses have taken financing from banks.
What is more important? Now, when you know the various ways of finding funds, it is necessary to understand how you can use the money to grow your business!
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