One of the most significant challenges any startup or small business faces in its early phases is gaining the necessary funding to allow it to function. Every business needs money to survive, and luckily there are many external sources from which funding can be acquired.
These sources are all different, and different businesses need differing levels of funding depending on what they do and how expensive their operations are to run, and how the financial markets are performing. Here are some of the popular funding options used by businesses every day.
Probably the most standard method of funding a business, bank loans have been used throughout history to prop businesses up until they really get going. A secured loan is taken out against an asset you own such as your house, whilst an unsecured loan simply allows you to borrow money.
Bank loans are swiftly becoming outdated as entrepreneurs realize that there are numerous alternatives which are often more generous in their repayment terms and accessibility. That being said, they are still a trusted and useful source of funding, and you know exactly what you are getting
Seeking out investment from a wealthy individual or group of individuals is known as angel investment, and the loan is nearly always unsecured. To convince an angel investor to get behind your business, you need a stellar plan and good arguments as to why your business will be a success.
In return for their investment they usually want a stake in the company, and unlike banks they will often take an active role in overseeing the business and providing advice on decisions. If you do receive an investment from an angel investor, it usually means you re onto a good thing, given that they normally have extensive experience in the business world themselves.
Crowdfunding is swiftly becoming one of the most popular methods of funding for startups and small businesses. It involves entrepreneurs and business owners pitching their ideas/plans online to the general public, with the objective of securing funding off people who like/believe in them.
As with angel investment, this requires a convincing business plan and an appealing idea in order to be successful. There are various websites which offer the means to crowdfund, affording you plenty of choice over where you pitch your ideas and who your potential target audience is. This is one of the cheapest and most effective ways of funding a small business, especially if you have very little capital to work with.
You can be as creative as you like when it comes to securing funding for your business. There are many options out there, and as long as you believe in your idea then you have every chance of convincing others to believe as well.