Thinking of starting a new venture is not only a brilliant idea and hard work. Entrepreneurs also need capital to launch and run their business. Many individuals believe they can self-fund their businesses, but it’s not feasible; they require finances to boost their startup. No wonder finding finance is not easy as it sounds. Looking for ways to find finance to boost startups is difficult now more than ever, given the global economic situation.
Once the startup starts growing, business owners can use funds to make new investments, attract a more extensive customer base, and make more profits. However, they must do their proper homework and ensure they are not losing funds on initiatives that aren’t providing good ROI. Here is the list of eight funding options new ventures can try to increase their finances:
1. Obtain A Bank Loan
A bank is the first thought that crosses entrepreneurs’ minds when thinking about financing the startup. Although getting a bank loan is not as easy as it sounds. Today, banks have strict policies, and they want to know about the profit history before lending a loan. However, suppose the individual has a healthy bank balance, possesses valuable assets, and a good reputation for paying taxes. In that case, banks won’t hesitate to fund small loans to the entrepreneurs. All they need is to provide details about the business type, plan, and valuation data.
2. Use 401(K) Or Retirement Accounts
Most startup owners get themselves tempted to utilize their finances accumulated in (401)k to boost their business finances. If they follow the right steps, they can gain access to these funds without any penalizations. Regardless, they must be cautious with the procedure or get financial advisors’ help to assist them with tricky legalities.
However, taping into retirement finances means that if the business plan didn’t work, they would be losing their dream venture and life savings. Young entrepreneurs must keep track of their expenses to avoid such situations. For this reason, Freelance Income Tax Calculator is the best solution to monitor business-related investments weekly, monthly, or yearly. It would help startup owners to break down their taxes, and when it’s time to pay taxes, they would know how much tax they need to pay.
3. Make Use Of Credit Cards
Credit cards work pretty much the same way as it does in personal lives; let a person out of the blocked path. Although many entrepreneurs go for this method, using a credit card to raise funds for the startup has some ups and downs. To begin with, it does not take much time to get approved for a credit card. Also, the minimum amount is reasonably decent. For quick and efficient business operations, especially during financial problems, a credit card may seem like an appealing choice. However, the drawback is the risk factors associated with it. If the entrepreneur misses out on payments, it can significantly destroy the credit balance. Not to forget the interest rates that come along with it. Even lacking behind on any one of the payments will leave the owners with a pain-stricken situation.
4. Get Help With Angel Investors
Angel investors are those individuals that finance the forthcoming startups only if they see potential in them. These are wealthy businessmen with a surplus amount of money ready to help young and aspiring entrepreneurs. Sometimes, they work together in the form of groups to analyze the business proposals before deciding to invest. Below are some pointers that can be useful for entrepreneurs to attract an angel investor:
- Thoroughly study the market trends, competitors and form a plan before presenting a business plan.
- Be concise, straightforward, and prepare a backup plan.
- Make sure that the new venture has an experienced advisor with it. It will ease the minds of investors and set their fears aside about dealing with challenging situations.
Getting an investment from angel investors is an enticing option since the business owners don’t have to pay the interest amount. One bonus advantage is that they also provide mentorship and suggestions during the whole period of setting up a new venture. However, this method also has its cons; entrepreneurs still need to return 20-25% of the angel investors’ investment.
5. Ask With Friends And Family
Reaching out to friends and family is the simplest way to seek help during a new venture’s initial stages. The bright side is that the entrepreneurs don’t have to pay back any interest amount. Again, receiving cash from your friends and family has some shortcomings. There is a high risk of imperiling the personal relationship because of the uncertainties of the future financial situation by borrowing money. To avoid any inconvenience, make a solid business plan, explain it to friends or family, and carry out all the legal paperwork.
6. Obtain Grants And Participate In Fundraising Contests
A funding contest is another non-traditional way to raise finance for a new venture. Various programs offer young entrepreneurs pitch their unique and compelling ideas in this contest. Business startups must present a reasonably comprehensive idea that would make them stand out among thousands of applicants. The best part of this fundraising competition is startups can get media coverage.
Acquiring a grant for a new business isn’t simple, but grant programs do exist. Some sources include Federal grant programs, State and local government grant programs, or private organizations. New ventures need to write comprehensive and persuasive proposals for obtaining a grant since the competition is tough.
7. Aquire Funds From Venture Capital Firms
Turning to venture capital firms is the most significant chance for boosting finance. These firms offer funds, introduction to prospective clients, strategic help, and personnel. However, bear in mind, venture capitalists are strict with providing finance to new ventures. They assist startups that are seeking opportunities with higher growth potential. It implies that getting venture capital finance may be practical for those startups that are already generating revenues. New ventures must prepare a strong elevator pitch to convince the head of a VC firm. After obtaining funds from VC, the startups must be aware that they have no other choice than to allow VC to give their input for running their business.
8. Acquire Funds From Incubators And Accelerators
One of the best ways to boost finance for startups is to consider getting funds from incubators and accelerators programs. Most early-stage businesses are acquiring funds from these programs. Incubators provide new ventures with training, resources, and valuable networking.
Whereas accelerators are almost similar to the former program, it takes one step further by assisting businesses to take significant steps. The time duration for both these programs is around four to eight months. An advantage of participating in these programs is that entrepreneurs can meet investors and mentors and make lucrative connections.
Final Words
The process of initiating a business plan is like a marathon, not just a sprint. Entrepreneurs ready to take a position in the business world should put up creative ideas and structure a solid plan to get financial support. It will be in the best interest to approach more than one funding option available. Also, they should be open to rejection when getting finance for the business.
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