You desperately want to set your startup afloat, but miss the funds to do so. It can be a lonesome ordeal: According to Small Biz Trends, the vast majority of startup funds (82 percent) came from the entrepreneur himself or herself (or family and friends, if they are especially lucky). However, getting the funds is one piece of the puzzle because you also need to be ready for financing as well.
It may not be a piece of cake, but gathering enough financial resources to propel your startup into business can be done – even if you have no cash in your stash, your family and friends are just as broke (or unwilling to take the risk), and the bank has given you the cold shoulder.
The secret to successful funding is determining not just how much you need, but exactly what you need it for. (You would be shocked by the number of entrepreneurs who are trying to raise money for their company, but are unable to answer to what it will be allocated!)
Also, keep in mind that there is no single correct way of fundraising; what will work for you, may not work for another startup, and vice versa. You may even find yourself applying a mix-and-match approach because it gives you the best results (i.e. more money in your bank account).
So, what are your options if you’re ready for financing?
A saving grace for many up-and-coming startups and entrepreneurs, platforms like Kickstarter, Indiegogo and GoFundMe, and many others have collectively raised an estimated US $34 billion. Instead of trying to find one capital investor, you can sell your idea to many people who can donate any amount of money; from the most negligible on to as much as they (or you) would like. And if enough people chip in, you will have your business up and running before you even know it.
Tip: Before launching your crowdfunding campaign, do the legwork and research which one will work best for you (some have payment-processing fees or require you to raise the full goal if you are to keep any of the money raised).
Angel Investors, Incubators And Accelerators
At the bottom of it, it’s a simple exchange: An angel investor invests in your startup in exchange for a future equity in it (usually amounting to 20-25%, but it can grow to as much as 50%). It has become common for angel investors to form so-called angel groups or angel networks, which they use to pool their investment capital.
Before you start looking for your own angel, bear in mind this means diminished control over your company. You could end up giving away a big portion of your business, even if it is against your wishes.
Starting out can be rough, and it is even more so when a single payment from your client(s) determines your future business move. Luckily, there is a solution known as factoring (or invoicing advances). Business News Daily describes factoring/invoice advances as a process in which “the service provider will front you the money on invoices that have been billed out, which you then pay back once the customer has settled the bill.
This way, the business can grow by providing the funds necessary to keep it going while waiting for customers to pay for outstanding invoices.” This financing option is very convenient when you’re in between billing periods, as it allows you to retain your cash flow even when you’re waiting for your clients to pay you.
With the economy getting tougher in the last couple of years, the banks have become much more cautious in granting loans. Thankfully, the government has stepped in. If you have sufficient proof that you cannot obtain the money otherwise and tick all the other boxes in front of the required qualifications, you might be able to get a government-funded loan. So start digging and explore all the options you’re eligible for. You can customise your search of funding options on the UK Government’s site.
Using your credit card(s) to set your business in motion is a risky move, and one we would recommend only when you have exhausted all other options. However, there are some very successful businesses that now trace back to their humble beginnings – all thanks to wisely using their credit card. Could this work for you, too? On the plus side, you will remain in full ownership of your company and get access to the money straight away.
The minuses are obvious: High interest rates, and if your business fails, the debts are still going to be there, waiting to get paid. Weigh the pros and cons carefully before pulling out your MasterCard or Visa.
Final Words: Is My Startup Ready For Financing?
Getting funds for a startup is tough but it will be a lot easier if you know that your startup is ready for financing. If it’s ready for financing, it will be easier to get investment funding, government loans, and other financing options.
Do you think your startup is ready for financing? Then find out now by enlisting the help of an expert Mavyn who can dramatically improve your chances of getting financing for your startup.