While some inexperienced entrepreneurs launch their first business with nothing more than high hopes and unjustified confidence, the smart ones know they need cash backing. All businesses need some form of funding, but it can be extremely difficult to source. Bank loans often require a provable business history, and other forms of loan often take far too long for the application to be approved. Not having enough financial backing to launch your business can halt your future prospects very quickly.
If you’re in the process of launching a business, then here is a rundown of the many ways that you can source that vital cash backing that will reduce the risk of your venture floundering.
This is fast becoming one of the most popular methods for avoiding much of the risk of sourcing financial help for business launches. Bootstrapping simply means relying on the funds that you already have. Not looking for loans or investors and relying on your savings or ongoing wages does give you far greater control over the day to day management of your new company. Bootstrapping forces you to think outside of the box, and that means creative solutions to financial needs.
If you have little in the way of savings to support your business venture, you might consider selling some of your possessions in order to find the necessary cash input. Many websites will now buy gold at good prices, meaning that you may have more potential money in the bank than you thought.
- When you are unable to solve problems without throwing money at them, you learn more about how your new business runs.
- There are no debts to repay or bureaucracy obstacles
- You may not be able to survive without monetary backing
- The larger your business is going to be, the less likely that bootstrapping is a viable option.
The rise of crowdfunding has been one of the success stories of the digital age. There are a number of different types of crowdfunding for businesses to look at, and the one that you choose will be dependant on the risks that you are willing to take. Some crowdfunders opt to exchange financial contributions for business equity, but this isn’t an option that some entrepreneurs are comfortable with. More common are those where a business offers pre-orders on a new product in exchange for the financial backing that will fund that product. This can be a very lucrative option, and there’s no disputing that crowdfunding is especially popular with millennials. If they are your target customer demographic, then crowdfunding might be the ideal solution to your money requirements.
- Crowdfunding is essentially marketing that pays you.
- Lack of official investment from banks or government funding.
- A good way to test the viability of a new business or product.
- There is a lot of competition on crowdfunding platforms, and it can be difficult to make yourself stand out enough to attract backers.
- Crowdfunding requires strategic planning and an investment of time.
Most banking institutions offer some form of business loan. You will need to provide an in-depth business plan that will convince the bank that you have a business idea that will work. This is the traditional way of finding the necessary funds for a business launch, but it is increasingly difficult.
The amounts that you can borrow will depend on the bank that you approach, and the terms of your repayments will also vary. Repayments on a bank loan are in regular batches, and if you are unable to cover those repayments then your business will quickly run into trouble.
- Bank loans often provide more money than other forms of fund-raising.
- Loan applications can be fast-tracked depending on your needs.
- Repayments can be high, and they can fluctuate quickly in turbulent financial periods.
- You will need to fill out a lot of paperwork and commit to building a substantial business plan.
- A bank loan can take longer than you think to come through, which may negatively affect your business timeline.
There are a variety of government programs available that can offer you the startup capital you need. Just as with banks, you will first need to provide an extensive business plan. That plan will go through several stages of assessment before you receive approval. It can take a lot of time to go through the process of government bureaucracy, but the repayment options are usually much lower than those offered by banks.
- Some government programs offer a significant amount of capital, which could give you a higher chance of success.
- Repayments are usually much easier to manage.
- Government funding can take a very long time to process. If you are in a hurry to launch, then this might not be a solution that you have time for.
- There is no guarantee that your loan will be approved, and even the slightest paperwork error can set you back a month.
Business Incubators and Accelerators
These programs can usually be found in any major city around the world. They are commonly groups of established business owners who are willing to invest in an up-and-coming business idea. There are differences between incubators and accelerators. The former are just as likely to offer mentorship as they are funding, while accelerators have a firm focus on getting you set up and trading as quickly as possible.
- Having mentorship from an experienced business owner might be more valuable than having seed money in the bank.
- A great way of forging connections with other business owners.
- There is a speed element to this option, and if your business does not launch successfully, there will be little time to promote growth.
- You may find that having a number of business investors will be a distraction from your core goals.
There are clearly a number of avenues to explore if you’re looking for the money required to launch a new business. The question is always going to come down to the work that you are willing to put into your fundraising, and the consequences of sourcing that funding. While not every funding option is going to be right for every business, each one is worth investigating. You may find that there are benefits that you hadn’t considered, and your business may benefit and grow as a result.