Success of business depends on solid network and spreading the word around along with many other strategies. Self business funding is possible only for high net worth individuals. Others have to depend on some kind of borrowing for business startups. A careful investment source is an important element for a new business startup of any stature. Proper funding is a major step prior inception of a business. An extensive research is required before one decides on the kind of funding.
Venture Capital for Business Funding
Venture capital is the business funding that is adopted by a majority of the startups. The kind of venture capital required depends on the nature of the business. Risk capital, as this is otherwise termed, can also be equity investment where a higher ROI is expected to eliminate hassles. From small grants to huge bank loans are available for anyone with proper know-how to unveil a potential venture. There are numerous means for business funding which a new venture can depend upon. Once set up, a new initiative requires patience to see the businesses grow and reap benefits. Procuring venture capital is altogether different from obtaining a loan. Venture capital provider often gives seed money for upcoming projects. The provider of this type of business funding exits once the return is achieved by divesting the shares to the new owner.
Angel Investors for Business Funding
Angel investors, provide investments for businesses in lieu of the venture scrip. The fund is provided if the startup meets the conditions of the angels. The angel investors are wealthy and offer their own funds for new businesses. These types of investors take lots of risk in business funding sector as the returns need to be very high. Angel investors draft an exit strategy by which the investment is expected to gain ten times the investment through acquiring or public offering of shares. Angel is a reference to a wealthy person, who is usually a retired entrepreneur with zeal to invest. They also act as advisors for starters if required.
Archangels for business funding
Archangels are external advisors to facilitate angel investors regarding business and legal matters. An Angel Investor who has done a multitude of business funding is known as super angel.
Bank Loans for business funding
A multitude of bank loans are available for entrepreneurs to depend on for business funding. The loans come in varieties such as one with special interests, overdraft convenience, repayment deals and many others. The banks look for securities to be submitted in lieu of the loan amount that they offer. They need to be convinced about the entrepreneur’s ability to repay the amount.
Loans from Family and Friends for business funding
Family and friends are other sources of business funding. But these are usually suitable for small businesses. Friends and family can help only to a limit. For larger amounts startups have to look for other sources. This can also be an angel investor friend.
Private Equity for Business funding
Private equity focuses on control over the firm and expects high returns from the investment. This type of business funding includes equity securities which are not put to public offering. Rich individuals and firms provide money in exchange of equities in businesses.
Government Grants for business funding
A government grant for business can be considered according to the nature of the business. The advantage of government grant is that the borrower needs to repay either a part or nothing at all. Apart from government, grants are also provided by many other organizations and charities. R&D businesses, inventions are some of the categories that are eligible for grants from organizations. Grants are usually small amounts and are not ideal for medium and large business as they have to look for some other investment sources to cover the entire financial needs of the businesses.
Startup Business Funding
The conventional method of gaining startup business funding is from the bank which is often a very tedious process in case of a new venture. While procuring a startup loan it is not just the money but the association with the investor also matters. For the progress of the company a healthy working relationship with the business funding provider need to be built up. Some of the small business startups are often funded by the entrepreneur himself. This can be from the savings or from some other personal sources. Startup loan, which is akin to personal loan, is an alternative business funding choice for new entrepreneurs to get going in their ventures. Apart from angel investors there are some organizations that are willing to take risks and provide startup up business funding to help new companies. Cash advance against the merchant’s account is another way of startup business funding. These funds are easily available, in fact within a few days of applying.
Startup business funding is a great process albeit the market is flooding with ample investment options. Many investment firms are careful about investing in startups as the risk involved is high. An established business will get funding easily as the investor is guaranteed of ROI. The seed capital providers for startups are usually angel investors and many other private lenders. Venture capital providers are known to offer second round business funding and are careful about startups. Startup business funding is often done by angel investors after thorough scrutiny of the project. A good business plan that presents a potential business that can impress the investor is essential in this case. This business funding option also has the advantage of gaining a good consultant in the investor. The angel investor also expects the entrepreneurs to seek their consent in certain major decision related to the business. Another startup business funding option is private equity where the investor will take the company equity in lieu of fund provided.