Whether you are looking to start or grow your business, you are going to need some form of funding to get it underway. However, figuring out what sources of funding are available to you as a business owner is trickier than you might first think. This article serves to list some of the ways that can help you get/raise funding for your business, along with weighing their advantages and disadvantages.
1. Small Business Loans
Traditional business loans can prove to be an excellent source of finance for your business venture, provided you can get them at a reasonable rate. However, you need to carefully go over the terms you agree to, and as much as you can, try and find other sources of finance as well. Apart from traditional banks, there are certain government agencies, such as the Small Business Administration (SBA) that can assist you in getting the loans you need for your business.
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2. Small Business Grants
The United States Government, local authorities, and private organizations provide funding and grant opportunities to small businesses across the country. These grants are typically available for new companies or existing businesses who are supporting economic growth in a particular area or nationwide, by developing technology in a specific field or helping the disadvantaged.
To be eligible for a small business grant, you must meet the grant-specific criteria. You’ll then need to apply and undergo a vetting process. The main benefit of grant funding is that it’s effectively free money, which you don’t have to pay back.
However, sometimes grants are not the right funding route for your business. Some have very specific eligibility requirements, and some use a very time-consuming application process. You need to consider whether you can afford to waste the time it takes to apply for a grant, should you be unsuccessful.
3. Business Accelerators
A business accelerator is an organization that offers mentorship, capital, and connections to investors and business partners. It’s designed for select startups with promising MVPs and founders, as a way to rapidly scale growth.
Business accelerators can be a great way to grow your startup business. Do note, however, that the failure rate beyond the accelerator program is exceptionally high; many companies face difficulty transitioning from the high level of support they receive in the program to complete autonomy.
4. Bank Overdrafts
Business overdrafts are effectively a super-fast way to set up a loan. When your balance hits zero, you can carry on making payments up to the limit set with your bank, known as the facility. Having an overdraft facility is a useful option if your business operations include seasonal activities, where you may have short-term cash flow shortages.
Crowdfunding has gained a lot of traction when it comes to startups. If you have a great idea and are successful in pitching it to the public, you may be able to raise a substantial amount of capital. Useful platforms such as Kickstarter, IndieGoGo, etc., can help you in raising the required amount.
6. Business Credit Cards
Although, you should avoid using credit cards to start a business, however, they can be a great way of sustaining it. The bank provides you with a certain limit and if paid within a particular timeframe, you will not have to pay any interest on it. If you require quick money in times of need, then this is a great option to have. However, you need to remember to not depend on it too much. Only use it in times of need due to high-interest rates.
7. Angel Investors
Angel investors are basically people with a huge amount of capital and are willing to invest it on over the edge business ideas. Angel investors sometimes come together in groups to scrutinize business proposals, in order to select the perfect candidate to invest in.
8. Invoice Finance
Invoice finance means that a third party will buy unpaid invoices owed to your company. They’ll pay you up to 85% of the value immediately and the remainder once the invoice has been paid to them, minus a fee.
9. Venture Capital
Venture capital funds are managed by professionals that have a keen eye for seeking out companies with great prospects. Their modus operandi involves them investing in a solid business rather than equity. Once there is an IPO or acquisition of the business they are partnered with, they then pull out and seek other investments.
10. Lending Companies
These are companies that bring lending, but they are more dynamic and modern than a bank, and the main feature of this method is the fact that they don’t ask for too many requirements, and usually provide online registration forms to check availability for loans. These lending companies support small businesses and startups, by providing funds for their projects.
11. Business Competitions
This might sound like an unorthodox method for raising funds but can prove to be effective. There are plenty of competitions being held all over the United States. Such competitions typically target startups or businesses in their early stages and give them a chance to grow further. One downside is, that you’ll have to be prepared to divide your time and attention between your business and this competition.
12. Tax Reliefs
This is an indirect source of funding. However, there are plenty of ways that you can utilize the money you save on taxes, which also will eventually open up funds that you can utilize elsewhere in your business.
Although the above is not an exhaustive list, it should, however, give you an idea of what kind of funding suits your business needs.
There are in fact plenty of options available out there. But it is important to seek financial advice from trusted experts in order to identify the right fit of business funding sources for your business so that you will understand the whole facet of fund sourcing that will be most beneficial for your business.
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