The issue of funds is always a thorny one in most businesses. Funding can sometimes spell doom for a startup and even for established businesses. Startups will obviously be more affected by this lack of funding. This makes funding the number one concern for any startup. There are quite variety of ways in which this can be done. It is therefore quite surprising when you find a perfectly good startup lacking financing and ending up failing. As per survey, the success rate for any new business is around 6% whereas 94% of startups fail during a year of operation.
Here is a complete guide that rundowns top subsidizing alternatives for new companies that will assist you with raising capital for your business.
- Fund yourself
While this may not sound like the best or even remotely useful advice, it is valid. Most times you’ll find that a startup could have been funded but the brains behind them, either did not explore this avenue or opted out of it prematurely. While it can be tough to run a business that is privately funded especially when it is the first such venture, it is not impossible. It will of course mean that you may have to start smaller that you originally anticipated but there are some hidden benefits to struggling on your own. One of these is that you get to keep the whole business without having to split shares with third parties.
Most people overlook help that is right in front of their eyes while trying to chase another person’s success story. Friends and family are hardwired to help one of their own yet most people skip them and go to other sources. If anyone will believe in your idea, friends and family should be at the top of that list. The startups can use personal finance software also to manage their financial transactions.
- Bank loans
Nobody really ever wants to have a debt, even one that they are quite capable of paying off. There is just something about giving out your hard earned money. This however is one of the ways that is open to most entrepreneurs. This could be the reason why this is the number one go to choice for most startups. Each bank will have their own established avenues for helping startups tailor-made to their clients. Banks may opt to offer just the initial capital or provide funding until the business is established and is capable of paying back the loan.
The bank will obviously be careful to protect their interests and will therefore scrutinize the proposals by a startup before offering any solution. They will not invest any amount if they feel that they could end up losing money. This means that before approaching any bank you need to make sure that your business plan is well thought out and does not have any holes that would leave the bank feeling that yours isn’t ready. The benefit of this avenue is that there are better chances of getting sound financial advice for free. The bank will also go out of their way to ensure the success of the business because they want to make their money back plus interest.
A great number of startups are not aware of this avenue and this is largely because it has not been in existence for very long. This method is however starting to gain major ground as an option for startups to get that much needed funding. The concept greatly depends on goodwill of the people because it works as somewhat of a charity basis. The startup basically puts their business plan on the crowd -funding platform together with goals and requirements for anyone who logs in to see. Those that like the concept and are convinced can then proceed to pledge money for the startup.
The reason that this is becoming such a hit with startups is because it has three distinct advantages over bank loans. The first is that you do not get charged any interest. The second is that this method actually helps draw attention to the business and its products and third is by opening up the business module to scrutiny, you get some valuable advice from helpful critics. Crowd-funding essentially eliminates the need to deal with profit hungry investors who may put too much undue pressure on you and your business. The ordinary people that provide the funding are more forgiving and somewhat more patient.
- Royalty financing
This is another viable way of acquiring finance that is quite easy to understand. In this method you pitch your idea to an investor and if they like it they will float you the funding you need. You will of course have to agree on a percentage of the profits that they will be getting once sales start flowing in. In this way the investors get their money back as well as some profit. The percentage as well as the duration will vary from one investor to the next.
- Venture capital
This is one of the more traditional methods for startups to get funding for their ideas. This is where investors go out looking for business ideas that show promise of being successful. They will then offer funding to such companies as well as other types of help that such business needs. In a way this method of funding is somewhat similar to royalty financing. This source of funding is however only works for business that promising big returns to begin with.
- Business partner
This is again one of the more traditional techniques of funding for a startup. The owner of the idea may not always have the know-how of running a successful business. They may also be low on funds. To ensure that the business succeeds they will want to join forces with a partner who would ideally fund the idea to get it started. You may agree to have a partner who contributes to the running of the business or opt to go for a silent partner.
There are multitudes of other ways in which startups can generate funding. The above are however some of the easiest and most viable options for any business in any part of the world. There is of course a need for each of these methods to be thought out to ensure success.
Misha holds a Master degree in Marketing and bachelor in computer application. She works as a content & marketing Manager at SoftwareSuggest. She likes travelling to hill stations and reading novels.
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