Young Money: How To Fund A Startup
Have you got a great idea for a business and now you want to make it happen? You’re not alone. While every business with the idea, commercialising it is a whole new site of skills. Getting a startup business up and running is a challenge for anyone who has not done it before.
Entrepreneurs don’t usually have the ideas, i.e. they’re not the creative talent. They’re the people, the ideas creators turn to, when they want to see how far they can take the idea and turn it into a viable business.
The start up phase of any business involves a lot of working hard, but not exclusively, it also requires investment. Seed money can come from various sources. Without the money, to get started and provide ongoing investment as the business shows promise, your venture may take too long to mature and a competitor takes your place in the eye of the consumer. So where can the investment come from?
There are a lot of different funding options available for small businesses, and they all offer their benefits. You can find some examples of the most popular methods below, along with some additional information to help you choose which route might be best for you.
You will need to invest in yourself, i.e. put some of your own money in. If you have not got savings, consider other options, like your home loan. This is a hugely popular option for start ups that fail to get funding from other sources. Caveat Emptor: Always seek professional advice from your accountant, lawyer etc before taking on debt.
So if you have money saved up or can get a loan from a bank, funding your business will be a fast process. As aforementioned, there will be a personal risk here, but you won’t have to prove to anyone that your business will work, making it great for those who can’t get further than a concept without some capital.
Some banks and governments will offer loans to new businesses. In most cases, you will have to have existing cash flow to make this work, limiting the successful startups will have with it.
If you can convince an investor with the money to back your idea, you won’t have to look at other types of funding for business, as you will have both money and support. This isn’t always easy to find, and you will have to prove that your idea is worth their time, making it hard for those with nothing but a concept.
Personal Risk vs. Sacrificing Freedom
The choice you make when you’re choosing how your company will be funded largely rests on what is more important to you.
If you are willing to take on personal risk, using your own money can be a great way to go, as it will give you all the freedom you need to build the business you’ve been dreaming about.
For those who would rather keep their money safe, making a couple of compromises along the way can be a small price to pay for an investor or venture capital. This is a very personal decision to make.
Why Isn’t The Bank An Option?
A lot of startups find disappointment when they approach a bank for a loan to get themselves off the ground.
Unfortunately, history has shown that being too willing to offer new businesses money can result in heavy losses, and banks have learned for their mistakes. Before you can convince a company like this to support your venture, you will need to prove that it can make enough to pay it back, and most startups just don’t have the income.
Choosing the funding option which you use for your startup has always been a challenge. It’s becoming more common to find businesses which cost nearly nothing to get started, opening the doors to another idea for you to consider.