The first thing that comes to our mind while starting a business is nothing but money. Raising funds for business is the most important as well as the hardest factor to deal with. Financing options depend on the kind of business abilities that you have; including age, position, team, performance, market opportunities, etc. It’s not very easy to find investors if you do not have a great business plan and strategy in hand. Deciding to borrow some money as debt is quite common. That’s why in this article, we will take you through options that can help you with raising funds for your business.
Let’s find out where to look for money.
The venture capital is also a kind of businesses that help other companies with funds. The people who are known as venture capitalists are individuals who are paid for investing others money. They have significant responsibility for reducing the risks as much as possible. They look for businesses that they believe to generate a good income within just a few years. Most of the times, venture capital is not a good option for startups as they are being considered as red zones. However, as mentioned above; if you have a fantastic business plan that can become successful within a couple of years, there seems to be a chance of venture capitalists helping you with raising funds for your business.
Startups and small business owners often complain about banks and financial institutions for not giving them a loan to start/grow their business. Banks are not allowed to invest in companies as they are strictly limited in this perspective by federal banking laws. You must be wondering, why did we add this option in the article, then? Let us explain to you why! Banks and financial companies commonly give loans by observing and calculating the company’s inventory or accounts. Usually, there are formulas to decide how much can be loaned depending on how much can be recovered. For example, you have to show them proof that you can pay their money even if you fail to grow your business.
The Small Business Administration (SBA)
The SBA guarantees loans to startups as well as small businesses. However, it doesn’t lend loans directly; it connects you with commercial banks. Local banks usually administrate SBAs. To provide loans to startups, they usually require the owner itself supply at least one-third of the required capital. A reasonable business or personal assets must guarantee the rest of the amount.
Friends and Families
Commonly, friends and parents come to our mind at first when we are out of cash. If you have friends and family members who are financially in a god position or who can lend you some money to start a business; this is the best option to make your dreams come true. However, it’s not always an excellent idea to borrow a massive amount of money from your friends or families as you are not sure about what your business can become after you start running it. If your business is running successful, they’ll be proud of you. Otherwise, you might end up losing your friendship or family bond.