- Advertisement -
25 C
Lagos
Advertisement
Home Biznance Getting Business Funding for Your Startups

Getting Business Funding for Your Startups

- Advertisement -

A pertinent question for all great business idea is funding. Your idea may be brilliant, but how would you raise the money to get started?

As per studies, new business ventures usually fail because of lack of funding. Capital is at the core of startups. Hence, entrepreneurs are ever worried about how to finance their startup.

- Advertisement -

Despite the wide array of funding sources, there are primarily three general categories: Bootstrapping, Debt, and Equity. Here, let us explore the sources of funding:

#1  Bootstrapping

The ideal situation for a startup would be to venture out with a huge investor capital. But sadly, that is never the case. Often entrepreneurs fund their businesses with their own capital through bootstrapping or self-funding.

New entrepreneurs face problems in receiving funding without showing any traction and a plan for potential success. Hence, bootstrapping includes using personal savings, a good stock of sweat equity, credit cards, or borrowing money from friends or family.

While convincing banks is a hard work, your friends and family have better faith in your aspirations. Besides the interest rate is also more flexible when you borrow from family or friends.

Bootstrapping is often preferred due to its advantages. When you have your own capital, you are tied to the business. Investors consider this apositive point as your business progresses.

Startup funding generated with self-funding is required often to cover the essentials, such as assimilatingbasic office supplies or website domain.

It must be remembered that bootstrapping might only work out when startups do not require money from day 1.

#2  Crowd funding

Advertisement

One of the newer ways to fund a new venture is crowdfunding. So what is this exactly? It is like borrowing money or taking a loan or money for investment from more than one person. What you need to do is put up a detailed description of your business on a crowdfunding platform.

You will have to mention your business goals, profit-making plans, how much is required and for what reasons. The lenders will go through these details.

If they like the idea, they will invest in your startups. There are online pledges being made for a donation or pre-buying. Anyone can easily contribute to a venture they find interesting or promising.

The next question is why you would opt for crowdfunding. Considering that you are detailing about your goals and aims, crowdfunding platforms prove to be effective ways of promoting your businesses as well. This helps in marketing besides raising the funds.

If you think that there might not be enough demand for your product, this is an effective way. Also, crowdfunding omits the professional brokers or investors by raising funds from common people. This might also help in attracting venture capital investment for your business at later stages.

A point to remember: Crowdfunding platforms are competitive if you are looking to earn funding. If you are opting for this platform, ensure that you have a solid business plan that will definitely attract the attention of the average consumers through mere online descriptions.

#3  Business grants

Small business grants are often made by organizations to businesses started by women, veterans or minorities.

There is local Small Business Administration that can actually help you out. If you belong to one of these categories, you can reach out to your local SBA or Chamber of Commerce and check if there is a local business grant for which you can apply.

A word of caution: Ensure before investing that you are not required to pay back the borrowed money or there are any conditions in the long run. It will not help you to acquire a debt at this stage.

#4  Angel investors

While the name sounds interesting, angel investors are people with excess cash, who are interested in investing in startups specifically. Such investors might also work in network groups and screen the business proposals for investing. Angel investors can also function as mentors or advisors.

Advertisement

There are several well-known companies that have been started with the help of angel investors. This form of investing usually occurs at the initial stages of growth, where the investors expect up to 30% equity. Thus, they are ready to risk money for better or higher returns.

The only drawback here is angel investors agree for a limited and lesser sum as compared to venture capitalists.

#5 Equity

This refers to raiding a capital for startup in exchange for stock in the company. Equity is a rare option when compared to bootstrapping or loans. The reason why owners opt for this source is that it does not engage personal savings or collateral and you need not pay back immediately the installments.

There are several downsides to equity investments. The risks involved are generally high and ROI is for longer periods. It is also like giving up ownership to the business you have just started. Allowing someone a stake in your company ties you to the investor for the sake of the business.

#6 Venture capitalists

These are big bets. Venture capitalists are professional who manage funds to invest in companies that have potential. So how do they invest?

It is done against equity and they exit when there is an acquisition or an IPO. Venture capitalists can be your mentors and even act as a litmus test on how the company will fare by evaluating the business from the scalability perspective.

Such funding is ideal for small businesses that have gone beyond the startup phase. Companies, such as Uber, make a perfect case for venture capitalists, where the exit strategy that is in place can return several million dollars that can be utilized to invest and grow the company further.

It is good to remember that venture capitalists are not loyal to your business. They would want to recover their investment within a small window period.

Conclusion

While funding is essential to a startup, what really helps is a correct assessment of how much funding is required to get things moving. Being in debt or remaining under external funding for too long might hinder you from exploring the market opportunities to the maximum.

Advertisement

Author Bio:

John Bell has been writing articles on Social Media, skilled business consultant and Financial advisor for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same. For more details please visit here.

- Advertisement -
Guest Author
This post was written by a Guest Author. Please see their details in the post above. If you'd like to Contribute towards the growth of The Xplorion, please check our Contributor Page for details about how YOU can share your tips with our growing community.
- Advertisement -

Trending Now

Four Steps to Learning to Ride a Bike

When we took our son shopping for his first bike, his expression was priceless! He was thrilled that he could now ride bikes with...
- Advertisement -

Startimes Subscription Prices, Packages and Channels List in 2020

StarTimes Nigeria is one of the popular cable TV providers in Nigeria. This service is a subsidiary of a Chinese based company called Startimes...

GB WhatsApp Pro, OG WhatsApp Pro V8.10 (GB OG Replacements) Latest Version

Good day peeps, the latest GBWhatsApp is here... and it is called the GB WhatsApp ProRemember earlier, GB Mods the maker of GB WhatsApp...

Best Low Size PC Action Games For Your Old PC/Laptop With Low Specs

Gaming time is one our favorite time and nothing beats the ability to play high-quality games on our PCs but like some of our...

GB WhatsApp, WhatsApp Plus and OG WhatsApp Tips and Tricks

Checkout the new GB WhatsApp Tutorial.Hello, welcome to WhatsApp Plus, OG WhatsApp and GB WhatsApp tips and tricks. For the sake of this article,...

10 Best Places to Download Bollywood Movies

Do you spend hours watching Bollywood movies as I do? Have you been in search of the perfect sites to download the best Hindi...

DStv Channels List, Packages and Prices in 2020

Thousands of people in Nigeria have put their trust in DStv to provide them with the very best of television shows and programs.DStv (Digital...

Screen to Body Ratio: 22 Smartphones With the Highest Screen to Body Ratio in 2020

Screen to body ratio on a smartphone screen recently turned into an important thing to consider when comparing smartphones.  It became more important after...

5 Best Blood Pressure Apps for Android

Blood pressure is the pressure the blood applies that on the walls of the vessels they use in travelling. There are two conditions relating...

All iTel Smartphones Firmware/ OS Updates (Free Download)

Good day and welcome. I used to think Itel doesn't make patches or updates for their devices as the update page in settings always...

5 Best Under 15,000 Naira Smartphones in Nigeria

Smartphones are currently like the way of life today, and everybody needs one of them devices. The need to stay up to par with...
- Advertisement -

Related Posts

The Advantages of Using an Answering Service for Your Business

How many times do you pick the phone to help a customer during a typical day? If your business is somewhat successful, you might...

10 Actionable Tactics to Build a Winning Visual Brand Identity

Most of the experts, business owners, and even the simple users usually say that a good brand identity is important. But most of them...

Key Taxes That You Have to Pay in Nigeria

Taxation is process whereby persons and entities are required to pay the government of the day some pre-determined amount of money in order to...

Best Business Apps for Your Smartphone

Back in the day, having a mobile phone was like having a fancy sports car. Everyone wanted to have one and admired the ones...

How the Speed of Your Website Affects Your Business?

In today’s competitive business landscape website loading time has become one of foremost concerns of any online business owners.They’ve valuable content, pretty graphics and...
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here