Starting a business could be a difficult venture if one is not adequately prepared for what’s to come. One of the key areas one has to prepare for when looking to start a business is business funding. Unfortunately, many business ideas have died naturally because of the prospective entrepreneur not being able to find funding for the business idea. Getting funding for a business idea is one of the most integral steps towards starting a thriving business. In this article, we discuss five strategic ways to fund a business.
Bootstrapping is the most independent way of funding your business. It is a fancy word for funding your business with your own money. Often than not, to bootstrap, you will need to have some money saved up. If you don’t you may need to sell your properties like your car, house and other items to raise money for your business. The downside to bootstrapping is that in the event your business fails, you may lose your life savings.
Family And Friends Funding
When you are trying to raise funds for a new business venture, family and friends are often the first people you turn to. Family and friends funding is a form of crowdfunding where you may take smaller amounts of money from various family and friends to make up an overall sum that you need to start your business.
Family and friends funding like the name suggests is when members of your family and friends donate money towards helping you start your business. This type of funding is often more relaxed than other forms of funding. It does not, however, mean that you will not pay back as in some cases, family and friends give you money as a loan.
Small Business Loans
In many countries, there are opportunities for entrepreneurs to apply for small business loans from a government agency created simply for that purpose. Small business loans from the government often come with low rates and are spread across a number of months, thereby making it easier for the entrepreneurs and businesses to pay back.
More often than not, small business loans are used by governments to improve entrepreneurship and boost small business growth.
On the flip side, there are also private businesses and loan companies offering small business loans in many countries. However, these types of small business loans often come at higher rates than the ones the government offer. Before taking these types of small business loans, make sure that you research their terms and conditions before deciding if it makes sense for you.
Incubators And Accelerator
Incubators and accelerators are two different types of programs that entrepreneurs can enter to solidify their business idea and often times get funding for their businesses. Incubators often focus on helping an entrepreneur flesh out their business idea, then give them the opportunity to present these ideas to investors who they typically will not be able to meet on their own.
Accelerators on the other hand is a program that typically accepts small businesses that have a business idea with so much potential. The accelerator typically invests in small businesses and offers networking, mentorship and resource allocation that will help accelerate the growth of the idea.
Crowdfunding is a funding option where entrepreneurs post their business ideas to crowdfunding websites and solicit people that believe in the idea to donate towards establishing the business. Typically, early investors through this funding strategy earn a stake in the business if it grows. Please note that most crowdfunding platforms typically charge a percentage of the funds raised, so you want to factor that into your strategy when considering this funding option.
Funding your small business might be difficult especially if you have not raised funding for a business before. If you have enough money saved, you should consider funding your business with bootstrapping. But, if you don’t have enough to bootstrap, consider the other four funding options listed above.IMAGE SOURCE: Pixabay