Of the numerous challenges that face the new business owner, funding is one of the most important. Not only is it necessary to find the capital that you need, and to ensure that you have operating capital, but you also need to consider the future impact of that funding. Do you have enough available funds to be able to properly establish your business yourself? Will taking investment mean surrendering some degree of control over your business?
Fortunately, there are a number of ways that you can fund a new business, and the most appropriate will depend on your personal circumstances and requirements, as well as those of your business.
Self-Funding
Funding the formation of your business yourself means that you do not have to surrender any control or equity. You can make every decision regarding the business according to your own decisions, and bootstrapping a new business is a popular option. However, if you do not have considerable savings or enough money to survive on during the early months and years, then this may not be a viable option.
Specialist Business Credit
Organisations like Epsilon Business Credit can help you to find specialist business credit; loans, credit cards, and other credit options that are targeted towards startups just like yours. Typically, loans and credit cards do not require that you hand over any equity, but you do need to ensure that you have a guaranteed means of meeting repayments. Carefully managed business credit can provide you with the funding you need, without the need to hand over equity, and it is even possible to find credit options if you have bad credit.
Small Business Grants
Business grants are made available to companies within certain industries, or that meet other criteria. There are thousands of grants available, the money does not need to be repaid, and they enable you to retain full equity in your business. The application process can be long, you and your organisation need to meet strict criteria, and each grant has its own terms and conditions. Careful research is required to ensure that you choose the grant that is best suited to your business.
Crowdfunding
Crowdfunding is one of the most recent developments in the business startup capital space. People pledge an amount of money to your startup and, in exchange, they receive delivery of a product, early access to services, or promotional items in exchange for their money. You retain the equity, but you need a business plan and product or service that captures the imagination of potential buyers for crowdfunding to be successful.
Investment Angels
Investment angels are, typically, high net-worth individuals or groups of individuals that are looking for promising ventures to invest in. Angel investors may be found locally, through trade organisations, or online, and although they do require equity in your business in exchange for start-up funding, they will typically leave the decision making and the running of the business to you. Different investors will have different criteria, but it is possible to access sizeable sums using this funding technique.
Source Venture Capital
Venture capital investors are professional investors, and they normally look for businesses with a top quality business plan and forecast. Most investors are looking for big opportunities, so while they may offer access to a large pot of money, they may also want a considerable amount of equity in return. If your startup business is going to remain a small venture, then this type of investor will not usually see it as a viable opportunity in which to place funds.
Incubators And Accelerators
Startup incubators provide access to free resources, which may even include office space and some funding capital. These incubators, which are sometimes referred to as business accelerators, may be government run, community led, or driven by large organisations. Like government grants and venture capital investments, they tend to have specific criteria regarding the businesses that they will invest in. Although seed funding is available from some of these groups, others may only provide access to resources and consulting.
Finding the most appropriate means of startup investment is one of the most important early steps you will take. Your idea needs funding to develop and grow, but this shouldn’t be taken at any cost. If an investor wants too much capital, or a grant is too restrictive in its terms and conditions or criteria, then you should look elsewhere. It is important that you retain a degree of control over your business that you are comfortable with, in order that you can bring your vision and your passion to life.