The Various Ways In Which You Can Raise Funding Capital For A Startup
In the present times, the different types of startups are getting a significant priority by virtue of their promising nature. Business drives the economic world in large as well as small scale. The internet and the technologies associated with it are playing a significant role in the shift of business promotional methods to the digital world. If you are innovative enough and willing to take a risk, then you can come up with various new ways of promoting the business through the internet and earn a lot of profit. But in the initial days, it is vital to come up with ways in which you can fund your business and ensure that it is steady enough. There are different ways in which a business can be funded, and the various entrepreneurs across the world try and find new ways in which they can earn the funding of the business in its initial days.
Why do you need external funding?
You may wonder that what is the necessity for separate funding when you have your own money. There are many aspects of every genre of business, and it is not easy to come up with a proper business strategy that can be funded single-handedly. Every type of business need a lump sum amount to get started in the initial days, and rarely a person can single-handedly afford it. They can opt for loans, borrow from friends and family, get secondary jobs and earn the amount and other various ways are there that can be opted for. Whichever be the choice of your business funding method, do remember that almost all the different types of business funding have to be paid back at some point in time. Here we are going to list some of the popular ways in which various people in business have funded their business and these are various tried and tested ways which you can opt for.
This is the business term for self-financing. For a first time entrepreneur it can be difficult to self-finance completely on their own, but with the help of the savings and from family and friend, a number of people can actually handle the entire startup cost without opting for loans at all. Opting for help and investment from the friends and family members is less formal and complicated and the interest rate and the time period of paying it off are flexible enough. This should be the first funding option that you are considering as it is majorly advantageous. You do not have the hassle of paying off a bank loan which can be risky since if you fail to pay it off, you will end up in bankruptcy. But this is an excellent choice only when the initial funding cost is affordable enough and can be managed singularly.
This is where a number of people who are interested in your business idea and project are investing in establishing it. This kind of funding is very helpful when you have a good network of people who are interested in your products. This is another simple enough method of funding a business. The business owner can put up a detailed analysis of his or her business plan on a crowdfunding website and those who find it interesting enough can get in touch with the businessman and then fund the business as far as possible on their behalf. In return, they can gain in terms of finance or kind. Crowdfunding has a significant advantage because it not only generates the fund but also provide marketing alongside it. Different people may be genuinely interested in investing, and they would promote the business as well since they are also going to earn a certain percentage of the profit once the business is established. However, the major drawback is that if the business fails the business owner is liable of being held responsible for the losses of so many people which are rather trying crisis for any business person.
These are people with surplus cash and are willing to invest in startups provided they like your business plan. This kind of individual investors would be able to ensure that you are getting the funding from a singular source and hence there is less complication. But the major drawback is it is to a large extent a matter of luck to get connected with someone matching the criteria to be an angel investor. These investors expect a large amount of equity in the initial days of the business in return for their investment, and this is their profit of investing in your business. In order to get such an investor, you have to come up with a promising project that would be attractive enough to such investors.
Loans and debt consolidation
You may opt for seeking a loan for managing your business, but this is the riskiest of the funding procedures. There are a number of formalities associated with a loan one may not get the loan easily even if they qualify in most of the criteria. Moreover, the bank gives the loan in lieu of any asset that you have and in case you fail to pay off the loan, you would be stripped of your assets and left bankrupted in the worst case. The debt consolidation loans are a great way of ensuring that you are getting some exemption on the loan amount that you have to pay off.
It can be concluded that the debt consolidation loans would be necessary when your business fails. If you are brave enough, there are a number of funding methods that you can choose and make sure that your business has a good amount of progress in the initial days. Choosing the right kind of funding is essential for ensuring that your startup thrives in the long run. A number of people are switching to start-ups and business for its benefits despite the risk factors.