Having the right funding for startups can be the key to successful business. There are several ways you can fund your new company, including traditional bank loans, crowdfunding and investors, and knowing some of the pros and cons to each type can help you choose the best fit for your individual needs. You can even use a combination of funding sources at different stages such as investors for your seed funding, loans for real estate needs and crowdfunding to launch new product lines.
Investors are those with excess capital and a desire to invest in the next generation of businesses. This means giving up some equity in your company in exchange for funding but can be a good way to get mentoring advice from someone who has been were you are now. It is important to keep in mind that investors expect their advice to be followed quickly and effectively, meaning that you are giving up some control of the company as well.
One funding source that startups can take advantage of are loans. These can be through Small Business Administration loan programs, traditional bank small business loans or even lines of credit. These can sometimes be difficult to secure because they rely on both personal and business credit histories and since your company does not have a history, your personal credit will usually need to be excellent. Each type of loan will have a different repayment term and qualifications, but your lender’s loan advisor can help you find the right fit based on your company and finances.
One of the most popular ways to finance your new business without big investors or loans is through crowdfunding. This process involves preselling goods and services to the public and then using those proceeds to get your company up and running. Crowdfunding is a good way to prove interest in your offerings because you are building a customer base and audience as you finance your business. Once you have delivered on the preordered goods, you can update the crowd through email newsletters as new lines or options are announced to get more sales.
Financing startups can be an intimidating process involving researching your options and deciding the best route for your needs. You can choose from investors, loans or even crowdfunding depending on your type of business and personal factors such as wanting to retain or share equity, your credit history and your business model.