5 Ways To Finance Start-ups
During its first years, a startup will need significant investment to support its potentially fast and exponential growth. This article explores the various possible financing solutions that an aspiring entrepreneur can choose to finance his or her business :
Using personal funds (bootstrapping)
One of the best way to finance your business is to use your own money. Those who were able to make savings in the past can invest it in the launch of their start-up. The main advantage of this type of financing is that the entrepreneur does not have to borrow money from a banking institution. On the other hand, this solution presents certain risks, especially in the event of a personal emergency.
Asking your loved ones for help
If you don’t want to use a bank, you can borrow money from your family and/or loved ones. This credit may be subject to interest. Fortunately, it could be relatively low. However, if your business is not profitable and you are unable to pay your debt, it could tarnish your relationship. On the other side of the coin, it is possible for them to acquire shares in your company, in order to limit these risks.
Going for a personal loan
More and more entrepreneurs now prefer personal loans to finance their business. The amounts obtained through this type of credit are relatively small. Banks will not look at the potential of your business, but rather your financial situation. This type of loan is generally easy to access. Moreover, it is very easy to apply for on internet.
Crowdfunding is a “trending” solution to finance the creation of a startup, which can take the form of a loan, a donation or a capital participation. This financing solution assumes a structure that generates a high level of public interest and attracts media and social media influencers.
A traditional method of financing businesses, bank borrowing requires managers to make personal commitments and to guarantee to pay for the start-up’s debts. Professional credit is very difficult to obtain in the first few months, with revenues and profits still lacking.
Fundraising is very suitable for start-ups with a promising project. It consists of convincing investment funds or business angels to participate in the project as advisors and shareholders. Retail investors are often former entrepreneurs or senior executives.
Innovation aids, these public financing schemes, take the form of a financial aid or participation to support the innovation of young start-ups. Such financial programs are well known and encouraged, especially in emerging Asian countries.
Calls for proposals
some public research agencies, as well as corporate foundations, launch competitions and calls for projects in the framework of partnerships. Such programs allow for bringing creative new solutions in order to solve old problems. They also serve as a mean to acquire fame and financial gains.
Venture capital investors
In recent years, we have seen the development of venture capital companies. This solution has enabled the launch of many start-ups. Venture capital investors looking for interesting investments can perfectly help you finance your business. In addition to financing your start-up. They are also capable of advising you on how to manage your business, in exchange for benefiting from shares in your company.