A start-up business requires a lot of nurturing and careful planning, you can have an innovative product and the best team possible but without funding your business is never going to get off the ground.
Thankfully entrepreneurs today have a lot of options when it comes securing funding, but which is the best avenue to explore? There are pros and cons to every funding option and the best will depend on a number of different factors unique to your business. Let’s look at each of the funding options in more detail.
One of the more common ways to fund your business, start-up loans are available from a number of different lenders including banks, local authorities, governments organisations such as https://toploancompanies.com and groups and business associations.
Pros: Start-up loans require a lot of research and planning before you can even get one which means you’ll already have a good idea about what you’re going to do when your business is up and running. The terms and conditions of your loan will also be very clearly defined and interest rates will usually always be fixed.
Cons: Because a start-up loan will require a lot of planning they can be a very time-consuming process to apply for. Every lender will also have their own rules and guidelines that you’ll have to follow so they may not be the most flexible funding option.
Business grants are essentially free money! That’s always going to be a good thing right? You can get business grants from numerous sources including competitions and government-backed organisations.
Pros: It’s free money with no limitations (in most cases) on how you use it, winning a grant will also be a great marker of confidence in your business and could easily attract more customers.
Cons: Grants are fiercely competitive and will usually have a very long, time-consuming application processes. Your business will also often need to meet very precise criteria in order to apply for one as well, so don’t expect to be able to apply for every grant currently available.
Friends And Family Funding
If you have a great idea for a business but are struggling with raising the money you need to get it off the ground then you can always turn to your friends and family. Depending on your circumstances they might be able to loan you the money you need to get everything running.
Pros: Loaning money from friends and family is usually very quick and straightforward and you will already have a good relationship with them which means you’re borrowing money from a trusted source.
Cons: Borrowing money from friends and family is risky and you could easily damage your relationships with them if you’re not careful. You’ll also only usually be getting the money you need not some of the other benefits that come with using professional lenders like professional guidance and support.
Personal Savings/ Investments
There is no written rule that says you have to get the money to fund your start-up from someone else! If you have the money you need then you can always fund your businesses start-up yourself and like every other option, there are pros and cons to it.
Pros: Well, for one thing, it will without a doubt be the quickest way to fund your business and you’ll have complete control over what the money goes on. Many other potential partners, investors, and future customers will also be able to see that you believe in your business because you funded everything to get it off the ground.
Cons: Funding a start-up business isn’t cheap even a very small business can be incredibly costly to get off the ground. You’ll also be risking all of your savings in something that could fail and not many entrepreneurs are willing to risk everything they’ve worked for.
There are a number of ways to crowdfund your business and in the age of the internet, one of the best ways to get your idea off the ground is by using Kickstarter. It’s not the only crowdfunding platform but it’s the most popular and many businesses have used it successfully, but what are the pros and cons?
Pros: Crowdfunding gives you control over all the money and you don’t have to give up any valuable equity. You’ll also be able to gauge interest in your business and even use the crowdfunding experience to build up customers and make changes if you feel like you need to.
Cons: Crowdfunding is much more difficult than it looks, for every business that succeeds hundreds will fail. You need to be able to entice people to fund your idea and know how to make your business idea stand out from the all the others. It’s a very difficult and time-consuming process and the majority of people trying to crowdfund their business will likely fail.
Angel Investor Funding
Angel investors can quite literally be your guardian angels in the business world. They’ll lend you the capital you need to get your business growing while also offering guidance and support along the way. You can pay them in a variety of ways but most angel investors will take ownership of equity in return for their funding, it all sounds good but what are the risks to be aware of?
Pros: Angel investors will usually be experienced entrepreneurs/ business professionals themselves which means you’ll get valuable guidance, support and experience as well as the funds you need. They can also be incredibly valuable when it comes to networking as well.
Cons: Angel investors can be anyone so don’t think they’ll offer support or guidance because they could just as easily ignore you once they’ve lent you the money. Some angel investors can have the complete opposite problem by being too controlling and pushy as well.
So, that’s six different ways you can fund your start-up business each way as its pros and cons as we’ve discussed. And you can always use more than one options as well! But whatever you decide to do make sure you plan carefully and research each method in detail before deciding on what to pursue.