Are you looking for a fund to start or run your business? Are you interested to know how you can fund your business? Here in this post, we have compiled 12 ways of financing your business which you can explore while initiating your business venture.
The most critical step in starting a business is the financing part. Securing finance has always been the toughest part for start-up entrepreneurs. Let us find out what are the genuine ways of financing small business ventures below.
12 Most Genuine Ways of Financing your Small Business
1) Bank Loans
Generally, availing bank loans come first when people start thing of funding their business venture.
Banks normally provide two kinds of funding options to business owners. One is project funding and the other is working capital financing.
Crowdfunding is gaining a lot of popularity in the modern days of financing business ventures. It is widely recognized as a form of crowdsourcing or alternative finance.
This kind of funding normally consists of three players. One is the project initiator who offers the business idea and proposal. Second is the individuals or groups who support the idea and the third player works as the mediator or commonly called “platform” who brings the people concerned together.
3) Angel Investment
Angel investors are normally rich people looking to invest in new business ventures. Angel investors invest in early-stage or start-up companies. They invest in exchange for an ownership stake, normally in the form of preferred stock or convertible debt.
4) Venture Capital
Venture capital (VC) is a type of private equity form of financing. It is provided by firms or funds to small and early-stage companies which shows positive indicators in terms of growth.
5) Business Incubators
Business owners at their initial stage can go for Incubator programs as a funding option. Business incubators not only helps in funding but also work as a mentor for a business.
6. Business Accelerators
Startup business accelerators support early-stage, growth-driven companies through education, mentorship, and financing. Normally this program continues for a fixed period of time.
Recently, there are many contests being organized for facilitating business funding. These contests are intended to invite and encourage individuals to set up their own businesses.
8. Microfinance Providers
If you don’t qualify for loans from banks, you can try microfinance providers to finance your project
10. Govt Funding Programs
In India, you will find various Government loan schemes specified for small business both from state and central government to cater to the financial requirement of small businesses across the country.
11. Factoring/invoice advances
Factoring is a popular way of financing business. Normally, this is an expensive way of financing. When a company faces a cash crunch or in need of immediate money, it applies to factor. Simply put it is selling your receivables at a discount for immediate cash payment.
Say, if you pay 3 % of the total order amount in order to get cash up-front 30 days in advance, it is actually equal to an interest rate of 36 % annually. However, in a situation of a cash crunch, factoring is not a bad option for financing your business.
12) Self Funding
It is always recommended to invest your own money when starting your business. Of course, it depends on your affordability. Financing from third parties become easier for a running company.
Finally, funding your own business needs to be carefully calculated. How much fund is required? How fast you want to grow? If the fund requirement is large or you want to grow your business fast, you have to fund your project from third party sources. Carefully find out how much is your fund requirement and apply the best funding option mentioned above suits you most.