How to Get Funded For Your Business
Securing funding is a vital part of organizing your business. Through funding, you make it possible to start the actual operation of your business. This is where you get money for buying equipment, leasing office and securing your assets.
What are the possible funds available and what options are available to you?
When you talk business, it all boils down to capital. Capital is the most important asset that a business should have. Capital is used for buying or financing the starting requirements of your business, like securing your intellectual property, leasing your office property and purchasing your equipment.
Question is, how can one secure capital? It is surprisingly a difficult process, as contributing capital is a considerable investment and not all people you approach are good Samaritans that will give their money to a fledgling business that seems to teeter on the brink of uncertainty.
There are many types of funding available for your disposal, and these are:
- Bootstrap capital
Bootstrap capital uses personal funds. This is a very risky approach, as you could lose a lot of money if the business does not fare well. However, it does guarantee you full flexibility and freedom in running the business but you also have the responsibility fully to yourself. Bootstrapping also makes it slow for the business to recognize profits.
Individuals can always seek financing from friends and family, however, this may be difficult and can only come once. You also have a personal responsibility if the business does not succeed.
- Debt funding
This involves securing loans from banks and other financial institutions in order to raise capital. This is quite a long process as you, just like other individuals, have to pass through a check to ascertain your eligibility for a loan. However, debt funding makes it possible for you to acquire capital without having to use your own money. The only disadvantage is that you have to constantly pay interest or else you incur a default with corresponding penalties. It is also risky as some banks may require collateral.
These are funding provided for some financial institutions for businesses of a specific niche. Businesses don’t have to pay interest in this type of financing. However, applying for a grant is a difficult and competitive process. A grant may also limit your operations to a certain extent.
- Angel funds
Angel funds are given for free in exchange for equity and some guidance from the investors. You are basically delegating a part of your ownership in exchange for mentorship but you gain experience in return.
- Venture capital
Venture capital is quite difficult to secure when you are starting a new business because venture capitalists would want a good track record. In the event that they do invest in you, you must show them a good promise of growth and profits which you can do by polishing a good business plan.
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