Building and maintaining a startup business is by no means an easy feat, especially when business operations can run up significant costs. Luckily there are now many methods which entrepreneurs can use to generate the necessary funding to drive their business forward and promote growth.
Here are some of the most popular funding tools which are commonly used by business owners.
Those who have saved up a significant sum of money can use this to finance their business. Whether you have invested in global markets or simply put money away for savings each month, having a cash fund which you can use to fund business operations can be a lifesaver for any business in its early phases.
The main advantage of this method is that, unlike a loan, you never have to pay any of it back since it is all your own money. On the downside, however, it means you are tying up your own money in the business, which is also slightly riskier.
Wealthy individuals who invest their own money in a startup are known as angel investors, and angel investment can be an effective way of getting an immediate cash injection into the business. It involves pitching your business plan to an angel investor, and if they believe it will be successful then they will invest their money.
They will usually ask for a stake in your business in return, but an added advantage is that most of them are experienced business owners themselves who can provide you with expert advice. If such an investor believes in your idea, it means you could well be set for future success.
One method which has significantly risen in popularity in recent years is crowdfunding, which involves pitching your idea on one of the many crowdfunding sites (such as Kickstarter). Unlike angel investment, the people who will be investing in your business are not wealthy individuals but members of the public, so you have to tailor your pitch around this audience type.
Crowdfunding also gives you a good idea of the type of products/service your potential target audiencemay like to see, and you can use the information you glean from the crowdfunding community tohelp you build a successful business.
Government grants are a particularly good source of funding because you never have to pay them back. If you operate within an industry like green energy, which is seen as progressive and beneficial to society, then your chances of receiving a government grant are much higher.
They are, however, open to numerous different sectors, and only available to smaller businesses, so are especially suited to entrepreneurs starting out. To be successful in your application you need to have good reasons as to why you need to grant, and be able to provide a detailed and accurate business plan.
There is no ‘one size fits all’ solution when it comes to financing a business, as there are plenty of options available to suit the majority of needs. Research which would best suit your startup and use the funding wisely.