Having an idea for a business is one thing, but the key to getting it off the ground is often down to funding. You need to have an investment in the company to get started, but this can seem complicated. There are a variety of options available and you should consider each one to decide which is the best for your start-up.
Small business loan
Perhaps the first stop for most of us is a bank loan, and there are many small business loans available. Some are for small business ownership known as microloans, but the lending environment is a tough one now, and these can be harder to come by. You need to show the bank how the money will be spent and even then, there’s no guarantee that the bank will go for it. An alternative is to try small business loan providers who specialise in this type of financing.
A venture capitalist is a professional who goes around looking for start-ups to invest in. They usually have significant amounts of money available to them and are a good option for many types of business. It is worth considering that they do tend to lean towards more substantial opportunities with companies that have a team and some money in the bank. You may also need to give up some control to the investor for their funding or take on their mentorship.
An angel investor is a little like a venture capitalist but tends to be one person with a smaller budget. They are often looking to invest a substantial portion in companies, around half of the company ownership, so that when the business makes money, so do they. Small business development centres and dedicated websites can be the place to find angel investors.
Crowdfunding is the newbie on the block and is already a big hit. Platforms such as Kickstarter and Indiegogo are places where anyone can create a crowdfunding campaign. With these, anyone can contribute money to helping a business that they believe in. The entrepreneur provides details of the company – goals, future financial strategies, how much they need and for what. And if people like it, they pledge money.
The downside to them is that there are lots of campaigns that don’t get their funding, so you need to have an impressive idea to catch attention. A good story seems to make the best success.
If your credit rating is top line, then you might be able to get a credit card to help with start-up funding. There are specialist business credit cards out there that are offered for companies. It is the riskiest option in many cases, but you get the benefit of retaining full control of your company.
Watch out for factors like interest rates and minimum payments to make sure you can cover all the expenses in those early days otherwise you could quickly face mounting charges and encounter financial problems.
Don’t forget that sometimes the easiest ways to get funding for your business is to turn to those closest to you. Friends and family may want to get involved to support you and to make some money themselves. Or, they may have connections with others which may be great way to find that business investment. Sometimes, it’s a case of who you know opposed to what you know.