Putting all your resources in one investment will never be a good business strategy. This is particularly true when you’re just new in the business industry. Finding funds from different resources allow your business to overcome potential failures and improve your odds of getting the right financing for your projects.
Remember that even though you might find bank loans feasible, there are other options out there that can help you better. Besides, banks will more likely approve your loans if you show them that you have alternative ways to finance your business. It will give you a good impression as a person and an entrepreneur.
So whether you choose to finance your business through an angel investor, bank loan, or subsidies, these things have disadvantages and advantages. Let’s tackle them one by one, so you can come up with the best option for your startup company.
Own Investment
Since you are the business owner, it’s only fair to say that you’re also the first investor. You can invest by using savings or your assets as collateral. Finding investors will be easier if you have something to put on the table. It shows them how dedicated you are to starting your business and that you’re in it for the long term.
Money From Loved Ones
The investment money you get from your family, spouse, or friends is often called love money. Business experts call it the “patient capital” because the people who lend it to you are not waiting for the repayment anytime soon. First and foremost, they will lend you money and allow you to expand and be successful in your venture. It’s all about giving you the time you need to grow so you can pay them back when things are in order.
When you borrow money from loved one’s, you might need to consider the following:
- They may want to have a portion of the net income.
- Not all family and friends are capable of sharing significant capital.
- Having a business with family or friends can have drawbacks.
Venture Capitalism
Let’s get one thing straight: venture capitalism isn’t for all entrepreneurs. Before diving into it, consider that venture capitalists are opting for technology-based businesses and companies with extremely high growth potentials in biotechnology, communications, and IT.
In short, they only take risks in projects with high stakes yet promising possible returns. Moreover, they might ask you to give up part of your ownership, which can be an issue if you’re a new businessman. Be sure that this option is the right fit for your business to avoid regrets in the end.
Bank Loans
You can never go wrong with bank loans. As long as you have an excellent financial standing and your credit score is high, you can quickly get approved for business loans. Bank loans have many advantages, low-interest rates, extended payment terms, and convenience. In fact, did you know that you can now pay your loans through online payment options like push-to-card? Yes, you don’t have to bring cash over the counter anymore to pay your bills.
Overall, remember that banks typically look for investors that have good records. And not only that, you need to present a great business plan to persuade them that you’re a responsible borrower.
Subsidies and Government Grants
The good news is that the government offers financing options like grants and subsidies to help small entrepreneurs. However, it won’t be easy. You’ll need to prepare many requirements and pass the criteria.
Getting approval for grants is challenging. You will need to compete with various aspiring entrepreneurs and prove why you are most deserving. Overall, here are the things you need to provide:
- A solid business plan, including project description
- An explanation of why your project is beneficial
- A work plan that includes all the possible costs
- Your experience in entrepreneurship and its relationship to your project
- Application forms with complete information
In general, reviewers will assess your business proposal according to the following:
- Approach
- Significance
- Innovation
- Need for the grant
- Expertise
And here are the possible reasons for getting declined a grant:
- The project is irrelevant.
- Poor location choice.
- The aspiring entrepreneur cannot express the importance of his project.
- The business plan doesn’t have a focus.
- It requires an unrealistic amount of work.
- Funds don’t match the proposal.
As you can see, finding funds for your business is both complicated and requires effort. But don’t get disheartened yet. It would be best to create a business plan that will encourage investors, banks, and the government to lend you money. Your business plan is the key to persuading them to help you start your business once and for all.
