Saturday 2 March 2019

How to Source for the Required Funding for Your Startup

How to Source for the Required Funding for Your Startup

There are many people out there who dream of becoming an entrepreneur and they also have huge saved money to fund but unfortunately, they don’t have a feasible and sustainable idea for a business. On another hand, many have an excellent business idea but lack a source of funding for their business to start up. No matter how revolutionary or unique a business idea you have, it is unlikely to take off the ground until you have a proper source of funding.

A recent study found that more than 94% of new businesses fail during their first year after startup. The most common reason for failure is believed to be the lack of capital and proper funding sources. Money is the backbone of any business. Gathering of funds that can help to build your startup is an enormous challenge especially if you don’t know where to start and where to find funding. Using the wrong ways and paths in search of funding will keep you away from the necessary funds and waste your time.

The need for funding greatly depends on the nature and type of business. But every business needs fuel to start and move called capital. Here is a guide with different funding sources that will help you to raise capital for your business.

Bootstrapping

Bootstrapping is also known as self-funding and it is the process of utilizing your own personal saved-up funds or from family or friends. It is an effective way of funding especially when you start up your business for the first time. First-time entrepreneurs often face trouble finding funding. You can use your own saved money for a startup business or ask your friends or family to contribute.

Self-funding is preferred because of its advantages. It has fewer formalities and compliances and less cost of raising and sometimes friends and family provide you with a very low interest rate. It is suitable for small business startups and you can get some if not all funds required for large business startups.

Taking a loan

Taking a loan from a bank is another way to get funds for a business startup. It is an easy way to keep the initial control of the business in your own hands. A loan from a bank is a good option but only for those who are confident that their business will surely prosper and run without difficulties. 

Taking a loan

Before you go for a loan, check the interest rates and terms, you must also check if you can pay back.  It’s a must to carefully check all the terms and conditions whether you can comply, you can get loans on reasonable interest rates with fixed terms by visiting this site A1 Credit.

For business owners having strong personal credit and who have a new business idea to start up, a personal loan is the best option. They have an advantage over business loans as they are simple, with no hidden fees and no complicated formulas. They are just simple personal loans with lower interest rates and easier repayment terms.

Using the strategies provided in this guide can significantly enhance the chances of existence and survival of your business. You can boost your startup business by employing any finding source outlined in this guide. You can use debt-free sources of funding or other sources depending on your business size either big or small business.

Crowdfunding

Crowdfunding is a way of generating a small amount of capital from a large number of individuals out there to fund your startup business using a platform such as social media. You can use crowdfunding websites and social media to easily access the investors and other people who may help you for funding. Crowdfunding websites are usually set up to allow individuals and potential entrepreneurs to show their business ideas and people who are willing to support their ideas and ready to fund business ideas.

Crowdfunding works when an individual makes a business pitch on a crowdfunding platform shares the whole business idea using models and explains its potential growth and future perspective. If that business idea clicks the minds of investors and is bought by the crowd funders on the platform, they will publically support that business idea and raise funds for the startup.

Angel investors

Individuals having surplus cash or a huge amount of capital and greater interest in investing in upcoming startups are called angel investors. Many prominent companies like Google, Alibaba, and Yahoo were initially supported by angel investors for startups. Angel investment is generally effective in the early stages of the company’s growth with up to 30% equity of investors.

Usually, investors take more risks in investments for higher returns. Often you can see angel investors coming in a group to inspect and analyze the business ideas to select a perfect idea to invest for a startup. The investors are usually entrepreneurs they also advise you and offer to mentor in addition to funds.

Win contests and competitions

Another way to fund your business startup is the participate in and win contests and competitions that require entrepreneurs to pitch or showcase their business model or idea against other participants competing for the same funds for their own businesses. If you want to win the contest and investor’s confidence you need to present a detailed and comprehensive business idea.

An increasing number of contests and competitions out there have tremendously enhanced the opportunities to find capital. For such competition, you have to build a product or create a model of your business idea. If you win a contest you will not only find capital for your business but also some media coverage.

In conclusion, securing funding for your startup is a critical step towards turning your entrepreneurial dreams into reality. The plethora of funding options available, from bootstrapping to crowdfunding, and loans to angel investors, offers entrepreneurs a diverse range of avenues to explore based on their unique circumstances and business goals.

Bootstrapping, utilizing personal savings or contributions from friends and family, provides an effective means for first-time entrepreneurs to kickstart their ventures with minimal formalities and costs. Similarly, taking out a loan can offer initial capital while retaining control over the business, provided careful consideration is given to interest rates and repayment terms.

Crowdfunding platforms leverage the power of social media to garner support from a wide pool of individuals, while angel investors bring both capital and expertise to early-stage startups, significantly enhancing their chances of success.

Furthermore, participating in contests and competitions not only offers access to potential funding but also provides valuable exposure and networking opportunities.

By leveraging these diverse funding sources and strategies outlined in this guide, entrepreneurs can overcome the daunting challenge of securing capital and position their startups for growth and success in today's competitive business landscape.

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