Are you ready to jump in and start your own business? The hardest part in this adventure is finding the funds. There are several possible ways to finance yourself, and, as a young entrepreneur, you may not have access to all the solutions. It is very important to choose the one that will best suit your business.
Are you ready to jump in and start your own business? The hardest part in this adventure is finding the funds. There are several possible ways to finance yourself, and, as a young entrepreneur, you may not have access to all the solutions. It is very important to choose the one that will best suit your business.
Here we show you 4 different financing possibilities for a start-up.
1. Financing by the bank
One of the most used forms of funding a business is bank financing. The idea here is to convince the bank with your business plan so that they want to inject money into your project. Note that you won’t always be greeted warmly by all banks if your company is not yet generating income. In addition, this type of financing does not grant them any shares in your start-up. They will, therefore, most likely ask you for guarantees (e.g., seizure of property, your own funds, or those of the company) to cover cases where things do not go as planned with your project. Remember that you will have to pay the interest on the amount borrowed.
2. A business loan
In addition to financing your business from the bank, you can choose to take out a business loan and use the money to finance your start-up. The amounts of these online loans are generally smaller than those of corporate loans. The bank will look at your financial situation, not the potential of your business. They are, therefore, easier to obtain. You can apply online through a form, and the money will flow into your account within days. Be careful; however, the risk is greater with this type of loan. Even if your business is in financial difficulty, it is on a personal basis that you will have taken out this loan that you will have to continue to repay.
3. Business angels/venture capital companies
If your loan application is refused by the bank, you can try the solution of business angels or venture capital companies. These forms of financing look similar but are not identical. A business angel is a person, often an entrepreneur, who seeks to invest his money in a start-up or scale-up, often in the branch in which he has been active during his career. He not only helps in financing but also gives advice on running your business. Business angels often do this in exchange for shares in order to have a stake in the business.
In a venture capital company, the investor is a company that invests in start-ups with money raised by different investors. A venture capital firm only invests when the concept has already been proven. Business angels, on the other hand, often invest early in the creation process. Neither invests on a whim, however. There is a long process of “due diligence,” and the investment is only made when the mission of the company and its potential growth are clearly defined.
4. Crowdfunding
A relatively new form of funding is crowdfunding, through which a group or association of individuals funds a project. In this case, you need to be able to convince the general public with your ideas. Individuals will then decide whether they want to invest in your start-up or not. The money each stakeholder invests is much less, so you need to bring together a large enough group for your cause so that you can reach the required amount. Platforms such as Kickstarter or Seedrs can help you contact investors.
