“95% of business start-ups fail in its first year of operation commonly due to lack of proper funds.”
You have got the perfect business idea that can bear the seeds of your hard work and dedication and finally provide you with fruitful gains. But, you don’t know how to source capital for your business idea.
Plenty of business start-ups struggle to raise funds for their initiative, which often ends up in a chaotic financial situation. A start-up indeed needs funds at different phases of its development, and initial capital is the most crucial one.
The need for proper funding depends on several factors, such as nature, size, and type of business you intend to start. For a location-based business-like departmental store or warehousing facility, you will need capital to buy land and building.
Whereas, if you are planning to try your hands in digital business, like a web development company or an e-commerce site, most of your capital will be invested in digital tools that will make your task easier. In any way, you would need adequate funds to make your dream come true.
If you realize that you lack proper funding and have a sudden requirement for stringent fundraising, you need to search for some reliable source of finance.
From banks to business credit agencies, there are plenty of credible ways to source capital. But, when it comes to sourcing the best and the most reliable financing options for your business, you need to be extra careful.
Here is a quick guide to the top 10 funding options for your start-ups that can prove to be beneficial for raising capital. Each has a distinctive trait that makes them ideal for start-up capital fundraising.
Let’s get started with the list to further ease up your hassle of finding the funding.
Best Ways To Fund Your Startup
#1 Start-up Loans
When it comes to thinking about fund sources, loans are the first thing that comes to our mind. Entrepreneurs generally prefer start-up loans as their ideal funding option. Start-ups with a big plan and investment outlining can be largely benefitted from the start-up loans. If you have a decent credit score, and low debt-to-credit ratio that you have cultivated over a period of time, you can easily avail credit from a reputed financial institution, However, you must remember that it may take weeks and even months to get the loan cleared, so you must be prepared for the gap.
#2 Business Line of Credit
When loans run out, you need to apply for a new one, and you end up in a never-ending cycle of loans. With the business line of credit, things are pretty different. If you have extensive funding needs, a business line of credit can be beneficial for you. It is a type of credit option exclusively available for businesses wherein your credit will be replenished when you payback. In the business line of credit, you only have to pay interest in case of the outstanding balance. It is a less financially burdening option of credit compared to a start-up loan.
There’s no doubt in saying that loans are a great help for businesses with funding issues, and there are different types of loans that can benefit your business in ways. Microloans are also a great loan option from the small business administration that comprise intermediary lenders who provide you with loans. Compared to traditional loan funding, it is much safe and easier to acquire a loan. You or your business is not put a risk by availing microloans. It provides a small amount of credit generally to encourage start-ups and boost their self-sufficiency. You can either start your business or use it for other business purposes.
It is not necessary that you only need funds for capital; there are other crucial tasks in a business that may raise the sudden requirement of funding. If you are looking for a small amount that would be sufficient to meet your immediate funding requirement, you can ask for grants from private enterprises or even the government. There are plenty of granting schemes for start-ups that are often hard to hunt down. You need to fulfill the eligibility criteria and make your business qualify for the grant. If you rightly understand the criteria and put your efforts to meet them, you can get industry-specific grants.
When you need funds for your business, you must not be hesitant to ask for help from the people. Crowdfunding has emerged as a common way to raise money for a business venture. In this method, you can increase your fund amount by collecting money from a large crowd; it is basically done online. Many credible crowdfunding sites facilitate the function for you. The amount you raise from crowdfunding majorly depends on how you pitch your business and create a compelling story to bring in more money. You can also go for equity crowdfunding that deals in sharing stakes. Either way, you need to promote your business efficiently.
#6 Angel Investors
Once you start a business, you will meet people who have already conquered milestones and created a stable position. Many successful entrepreneurs might be willing to help with the funding by investing in your company in exchange for its share. Angel investors are such entrepreneurs who will not only invest in your company but will also provide you with expert advice to excel in your venture. All the angel investors will look forward to getting the return for their investment. Hence, it would be best if you put all your efforts into bringing more profits. An important thing that you need to think before approaching angel investors is that they will take up a portion of your profit.
#7 Venture Capitalists
If you are a start-up with immense growth potential, you can make yourself eligible for venture capital. Venture capitalists are the private investors providing capital to start-ups that may grow magnanimously in the future. For this, you need to promote your business, grab interest in your business, and induce investment. You need to first shortlist the popular venture capitalists and prepare an excellent pitch to attract them. Find someone who will believe in your idea and understand your vision. With an incredible sales pitch, you can receive staunch support from venture capitalists. Make sure to learn about the investors before you turn up with your plan to add more elements to your presentation.
#8 Friends and Family
Irrespective of your financial situation, your friends and family will never leave your side. There might be many people close to you who will be willing to help you monetarily. You may not receive loads of funding for your start-up with this, but surely it can add up to the investment. Place your business idea in front of your family and friends and ask for their opinion. When you ask for financial help, you must clear the condition for it. Determine whether you will take it as a gift or intent to pay back the amount. In each case, you need to be prepared.
#9 Personal Savings
90% of start-ups fund their venture with their personal savings. Indeed, you can not start a business overnight, you need years of planning, and you might have saved for that. If you are a smart entrepreneur, you would have thought about raising funds for your business with your savings and avoiding the hassle of lack of proper funding. You must start saving the moment you plan to start your business and lay out the plan. Make a strategic plan for saving, self-off things that are not more purposeful, and can emerge as a good source of money. Set a target for savings and work to achieve it.
#10 Security Token Offerings
Last but not least, security token offerings are an efficient source of funding for the business. It is a public offering wherein the digital securities are sold across cryptocurrency. It is one of the low-cost financings for your start-up as digital securities and shares are quick and legal to monetize. Even security token offerings are being used in crowd financing as well. Over the years, the use of security token offerings is increasing. It will also expose you to a wide range of funding options than an IPO can offer.
The Bottom Line
Your start-up is like a baby; you need to nurture it with all your efforts, dedication, passion, and funding. You cannot deny the fact that initial capital plays a significant role in kick starting any start-up business, irrespective of its nature, size, and objective.
As you proceed with the business, the need for funds will begin to increase; you need to be prepared for all the fund requirements in a start-up business.
The above mentioned were some of the top and the most preferred funding options available for the start-ups. If you are also looking for adequate fundraising for your business, now is the time to think wisely.
Make sure to weigh each option according to your fund demands and make a well-informed decision. Don’t let your dreams sink into the deep sea of debts due to the lack of proper funding.