Whether you’re looking to start your company from the ground up or you need an injection of cash to move to the next level, you may be wondering how to fund your business. There are a number of different ways to go about this depending on the type of business you have and whether you are already in operation and for how long.
Angel Investors and Venture Capitalists
If you have an eye-catching idea, a terrific business plan and a map for growth, this may be the way to go. Tech startups are often funded by angel investors and venture capitalists. While both generally receive some equity in your company as a result of their investments, venture capitalists are more likely to want to take an active part in its management. Angel investors and venture capitalists can be responsible for taking your company in exciting new directions, but they are not right for every type of business, and not all entrepreneurs are prepared to give away a measure of control in exchange for the investment.
Many people use at least a portion of their own funds to start a company. If you are struggling to free up extra money, there are some creative approaches you can take. For example, you might be able to reduce what you are paying in student loans by refinancing them, taking just a few minutes to find out whether you can take years off your loan payments with a lower interest rate. You might also want to look into tracking your spending and doing a better job of budgeting, putting whatever you save into your business. The biggest advantage of self-funding is that you are not indebted to anyone and do not have to repay anyone back or let them have a say in your business.
Small Business Administration and Other Business Loans
You can get a government-backed low-interest loan through the SBA. This isn’t the route to take if you need the money right away or you can’t handle dealing with reams of paperwork. You’ll have to disclose a lot of information to get one of these types of loans, and you’ll need to have excellent credit in order to qualify. However, these loans offer excellent opportunities for those who are qualified and have the patience to go through the process. Alternately, you might look into getting a business loan from your bank or credit union. You’ll need good credit for this as well, but the process might be less involved than getting an SBA loan.
Crowdfunding is a possibility for some types of businesses, and if you go this route, your investors will not own a part of your company but will instead take on various rewards across different tiers of value. An example might be a small press publisher. A book could be crowdfunded with rewards that include lower prices for those who offer support through the crowdfunding campaign, a limited signed edition or copies of additional books by the same publisher.
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