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1st of August
So, you have a great idea and you know that it will grow into a successful business. You think about the journey of converting your small idea into a revenue generating business and you would be aware that it will be one painstaking yet exciting road to travel. But, you begin your travel, what you initially need is capital.
Regardless of the current economic climate, getting funds for your business, whether it is a startup or an already existing business on the verge of expansion, can be really challenging.
And with statistics revealing that more than 90% startups fail during their first year due to lack of funding, you being anxious about finding reliable solutions to fund your business is completely understandable.
To help you get through it, here are the most common no-hassle solutions to fund your business:
Self-funding or self-financing, also referred to as bootstrapping, is one of the most effective and hassle-free ways to fund your business, especially if you are just starting out.
As obvious as it can be, it is an undeniable fact that new entrepreneurs find it really difficult to obtain capital from an outside source, even if you have a clear-cut plan.
So, consider self-financing, and some of the ways you can go about it are as follows:
Personal assets: Selling one or more of your personal assets is one proven way to self-fund your business. A personal asset could be anything, from bonds to real estate to family inheritance; anything you are willing to sell to obtain the cash you need.
Personal savings: Perhaps the easiest way to self-finance your business is to take money out of your own savings.
In addition, this also shows potential investors that you are all-in and completely committed, thus helping you attain additional funding in the future.
Retirement account: Funds in your Individual Retirement Account (IRA) or 401k are also a viable option.
However, you might have to pay penalties for early withdrawal of the money. But, you can consult with a financial advisor about potential ways to avoid such penalties.
In addition to these self-funding options, you can also choose to borrow money against your home or use your credit cards.
If you don’t have any proper savings to tap into or your business demands more than what you have in your savings, you can turn to your friends and family for funding.
Unlike banks and other lenders, family members and friends are much easier to convince, and they wouldn’t be concerned about your credit score or account balance.
Also, since they will be investing in you rather than your business, they wouldn’t demand high interest rates or have strict repayment tenure.
Even if a loved one is not able to finance your entire business, they could still be able to lend you a few grands that will be helpful for various aspects of your business.
Crowdfunding is one of the newer solutions to funding a business, one that has been gaining popularity lately. In this legal funding process, several small investors with minor restrictions can fund your business.
This funding solution is ideal for those businesses that are in their early stages, and for those business owners who cannot get help from people they know, do not quality for a loan, or are not ready for venture capital or other types of funding.
When your business reaches its later stages, and there will be a point when it requires more funds, both for its regular operations and growth.
From adding new products to your lineup to expanding your operations to newer or international markets, there are many scenarios that would need millions of dollars as capital, and turning to a venture capitalist (VC) becomes a viable option here. VCs usually invest in businesses against equity and stay with the company until the business gets acquired or holds an Initial Public Offering (IPO).
Angel investors are those individuals who have surplus cash at their disposal and are interested in investing in growing businesses. In addition to capital, they also offer advice and mentor business owners based on their own experience.
And with their existing contacts, they will also be able to open new doors for your business and take it to new heights.
In general, banks are the first place entrepreneurs go to when they need funding. But, in order for the process to be hassle-free, it is best to go for bank loans once your business has started to make money and gained some traction in the industry.
This makes it easy for you to quality for a traditional bank loan, and with more banks becoming increasingly committed to small businesses, this is a good bet when you need up to $500,000.
Finding a no-hassle solution to fund your business is certainly one of the hardest aspects of getting your business going.
When you have a solid business plan that clearly shows the value investors can attain from investing in your company, your odds of securing funds from one or more of the funding sources discussed above will be high.