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The Best Ways to Finance Your Startup?

Companies / SME Jan 24, 2023 - 10:07 PM GMT

By: Boris_Dzhingarov


In the world of business and entrepreneurship, the beginning of the new year often brings fresh ideas and inspiration. This is none more true than in the startup industry. You may be thinking of finally developing that billion-dollar idea you’ve kept in your head for the past years. Before you begin, however, you need to develop a smart approach to securing financing for your new venture.A survey by CB Insights has shown that 29% of new start ups fail because of lack of funds or lack of ability to raise new capital. That’s why we are happy to present a guide to financing a new-start up.

Consider Crowd-Funding

Crowdfunding is an incredibly useful option for new startups for a variety of reasons. Crowdfunding involves raising money through many funders. These funders donate to your business in exchange for the product that you will eventually develop (or at least a discount on that product). 

Crowdfunding is most commonly organized through websites developed for that purpose, such as Kickstarter or GoFundMe. 

Crowdfunding is a potentially lucrative option for fledgling startups for two reasons. One is that it can be an active and long-term source of funding for your product. Another is that it can help promote your business by developing a community of people who are interested, and invested, in the success of your product. 

 Consider Small-Business Loans

Acquiring a small-business loan can be a great way of growing your startup in the early stages. There are so many options and a growing number of lenders to accommodate the specific needs of your startup. From terms loans to working capital loans, there are many avenues for funding.

 Make sure to do detailed research to find which suits your needs best. There is much to consider, including the interest rate on the loan, potential security requirements, and how repayment will impact your cash-flow.

Involve Friends and Family

Involving friends and family in the funding of your startup can be tricky, and potentially awkward. However, it can also be a quick and relatively informal way of raising money for your business. There are several ways to make the involvement of  friends and family in your business easier. 

One is to ensure that everything is written down so that there is no confusion about repayment. 

Another way is to ensure that you are realistic about when and how you will be repaying the loan (if it is a loan, sometimes the money can be a gift.) Ensure that all parties are honest and clear about repayment expectations, and rate of interest (if there is any) and you will lessen the chance of awkwardness and miscommunication later on.

Maintain a Day Job

It is often tempting, when starting your business, to throw everything into it and quit whatever employment you may have. Ambition and self-belief are important, however it may not be realistic for you to give up the job you have. 

Your employment may provide you with financial security in the early days of your business and lessen the financial pressure of beginning a new business. Yes, you may not be able to devote the entirety of your time to your new project, but the lessened financial pressure of having a stable source of income may help you grow your business in a more manageable way. 

Find Angel Investors 

Angel investors are highly-sort after in the startup world. However, if you can find them, they  can be a vital source of funding at the early stages of your venture.

 Angel investors are individuals who invest their own money in a startup, usually in exchange for equity ownership interest or a minority. They are often themselves entrepreneurs with a wealth of experience in the business world so they can be very useful to have in your corner as your business grows. 

Attracting angel investors can be tough, so make sure to have a clear and attractive  business plan for your startup when making an approach.

By Sumeet Manhas

© 2023 Copyright Sumeet Manhas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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