If you are planning to do business, it is essential that you also think about the funding practice. Several businesses start but ultimately close down due to lack of finance. Without adequate funding, it is not possible to run a business ongoing. If you have recently drafted a plan for setting up a new business but still lack the funds, here is a list of ways to help you get the financing needed for your new business concept.
Managing finances in today’s economic climate can be very challenging. We have compiled a list of financing techniques that will help you while pursuing funds for your business. But always remember that undergoing the current state of affairs no doubt, it is challenging to secure funds from the market.
This can be an effective and useful way of raising money for a creative project at low cost. Here, you will need to check out the plan regarding how you will raise money over a specified period and assuming a specific amount that you need – like borrowing from family members, friends as well as third parties who offer money on various conditions. There are a number of companies that are known for creative funding projects. You can approach them with your project idea to get the required funding.
Nowadays, the lending standards have become stricter than ever. There are several factors that you need to adhere to in order to get a loan passed for your new business. Still, several banks provide loans for small-scale companies.
Using a credit card to fund your business is risky because if you fail to pay the amount within a limited time, your credit score will decline tremendously. And even if you somehow manage to pay the minimum amount every month, it will be difficult to stop the vicious circle. But of course, a credit card can be used for emergencies to get out of critical situations. It should be used very cautiously in order to ensure that it does not become a burden on you or your business.
Now factoring is known for being a popular finance method where organizations sell accounts receivables for getting cash upfront at a discounted rate. Basically, this is used by companies that have poor credit. Sometimes even businesses prefer to use this method to get the amount for starting with the assignment they have received from their clients with a plan to pay it back after delivering the orders and getting the payment from the party. However, this is really an expensive way of raising funds. Organizations that sell receivables usually pay a certain fee, i.e., a percentage of the total amount. This means that if you pay around a 2% fee in order to get funds for a month in advance, then it almost equals to 24% yearly interest.
The old golden rules still apply when you are approaching an angel investor – you should avoid being succinct, prepare an exit strategy and avoid any kind of jargon. But due to the economic turmoil in the last few years, the game has become much trickier than ever. Here, we are going to share some of the tips that will help you to win the notice of angel investors.
Stay in touch
As a startup, you don’t have any such track record, and so it might be possible that angel investor doesn’t show any interest in finding your company. In order to combat that you have to formulate a specific way which will help you to keep them in the chain, in case of significant developments like major sales.
Know your stuff
If you expect to get somewhere with an angel investor, then you will need to go for a market assessment, solid sales, marketing plan as well as competitive analysis. As a startup, you will have to demonstrate your expert knowledge in your market niche along with the discipline that you are planning to follow throughout the game plan.
Having some senior members in the management team will actually help you out in getting the attention of angel investors. It will eliminate the fear of the investors about your ability to deal with the tough economic situations. Even if you have a highly experienced but unpaid advisor in your team, it would definitely add up to your credibility.
Avoid being a fad follower
Why have you actually started your business? Do you have a genuine passion for your business or you are simply doing it just because you want to earn cash easily? Angel investors can actually spot out your real motive, and if they find out that you are doing business just for getting rich quickly with the help of easy money-making schemes, they will hardly show any interest in funding your company.
Friends and family members
Taking money from your close friends and family members is one of the most common ways of financing a startup company. But you need to remember that when you are taking finance from your loved ones, you are also risking their financial future as well as jeopardizing the personal relationships. One of the significant mistakes that usually happen is that even before the formal business plan is created, individual approach their dear ones for the funding requirements. It is better that you provide them with formal financial projections along with evidence-based assessment while asking for the funds.
I have shared some of the most popular ways of gathering money for your business concept or new startup company. But ultimately it is you who have to find out which one will work out the best for you. There are several other methods, which you might come across in my upcoming blogs. But the fact is which one you should use to get the desired results. Before zeroing on a particular funding method, it is suggested that you prefer to go for consulting with someone who has adequate knowledge in business and funding method. He can suggest you the right funding method that will work for your business type.