Startup Business Funding Sources
Funding & Investors are often the last line of defence for a fledgling business, but for many, securing the finance they require can be one of the most frustrating tasks. For many start-ups, funding can prove to be even more difficult and there may even be questions as to whether funding is even possible or advisable. However, securing the finance that your business needs doesn’t have to be a minefield and there are a number of sources available for potential funding, including family, friends and investors. Here are just some of the ways you can go about getting the finance you need for your business:
Family & Friends. If you know anyone who is willing to put money into your business then this may be an ideal place to look for finance. Often there will be people in your circle of friends or family who have become regular investors and who may be prepared to provide seed capital or provide long-term financial backing.
Investors. There are many investors available both locally and online, who may be preparing to provide seed money or who may be prepared to take a risk on your business by investing in your development process. Most investors will require a personal guarantee from the business and most will require a credit check to ensure they are serious. Because the risk for these types of investors is relatively high you may be able to secure the funding you need from these sources without any hassles.
Private Funding. A number of entrepreneurs find they have access to small business loans which are provided by venture capitalists. These loans are normally secured against the assets of the business and will offer the entrepreneur the opportunity to raise a significant amount of capital. While they have access to a variety of loans, venture capitalists are not as likely to fund start ups from the same source that they would a traditional bank. The interest rates on these loans are usually higher than most banks and credit unions and they do not carry the same credit risk as other financing sources.
Seed Funding & Investors. Angel investors and other individuals are another source of startup capital. An angel investor is someone who has a vested interest in your business idea and your ability to succeed. Because their investment is not required up front, they may require a higher level of equity in order to make a commitment. Their commitment could be as much as 10% of the equity of the business.
Private Funding Sources. A growing number of entrepreneurs are turning to a number of private funding sources instead of relying on traditional banks and credit unions. A growing number of private investors are providing seed funding to new businesses. These investors typically seek to make a one-time investment and their long term involvement is usually minimal.
