The world is full of young people with amazing business ideas that they plan to turn into a startup company and present to the world. However, there are two common issues when it comes to such ideas. First, they aren’t always properly understood, and this makes it impossible for them to see the light of day. You wouldn’t really care if a random person couldn’t comprehend what you have come up with, but if the person in question is the one that is supposed to help you finance the idea, it is crucial.
The second issue is obviously getting your business idea financed. If you have managed to save enough money over the years, this won’t be much of a problem. Otherwise, you are going to have to start thinking about borrowing the cash. And one thing is a fact – you have to be knowledgeable about choosing a loan. You need to conduct a proper research and think about what kind of lender/investor is the best choice for you.
One of the better ideas for a startup to look for finances is to turn to angel investors. These people are ex-entrepreneurs and experts who will want to provide funding for your business idea once you prove to them that it is something that they are interested in and it’s going to pay off. The most commonly conduct screenings which you have to pass in order to gain their trust.
If you really want to make this happen, you must have a business plan in place. The thing about angel investors is that they look for a high ROI.
And when it comes to startups, a very large number of them falls apart in a short period of time, which means that angel investors lose too. This is the reason why they are on the lookout for small businesses that can return at least 10 times the amount that they have invested in them, in the next 5 years. You also need to have an appropriate exit strategy in place.
Family and friends
An option that can be both great and terrible is looking for a loan from your family or friends. Of course, these are the people that care for you and want to see you succeed. You do need to present them with a clear idea and a somewhat developed business plan so that they know that you are not just firing blanks. But they are, most commonly, much easier to persuade than, let’s say, the aforementioned angel investors.
The problem is that mixing close relationships and money can sometimes have catastrophic effects. You must be certain that you can pay the money back.
So, even though you may not have to have a fully developed business strategy in order to prove that you are worth the money, you still need to make sure that your close ones know what they are signing up for. At the very least, have an informal discussion about it, where you are going to tell them about all potential contingencies and risks.
So, make sure that you have all the specifics out in the open. Businesses tend to face various hardships, and you want to make sure that one of those doesn’t ruin your relationships with the people that mean the most to you.
You can also look for a P2P service, which usually comes in the form of a website, where you can match with an affordable lender. This is a common practice in various countries across the globe. You can go for peer 2 peer lending and get your business booming before you manage to grow and get the opportunity to expand.
P2P loans often have low rates, but you should always compare different lenders to be sure what kind of bargain you are going to get.
Another plus is that the application process is usually pretty simple, and you can quickly find out whether you are going to get funded. And, when you finally do, it is pretty much a matter of days, eventually weeks.
Once you grow your business well beyond the borders of the “new kid on the block”, you can actually turn to venture capital firms to help you with finances if you still need them. They are similar to angel investors, with the difference that they are much more interested in businesses that already have some kind of presence in their own industry/niche. This makes it harder to get, but if you have managed to make a name for yourself, it might be worth a shot.
Basically, venture capital is a kind of financing where someone decides to fund your business because they believe that it get generate high ROI pretty soon.
It is pretty often for venture capitalists to assume the role of a manager in your company. Thanks to this, you can make use of their skill set in order to truly push your business toward becoming an enterprise.
Every great business idea needs proper financing in order to actually see the light of day. This means that you have to think about your options when it comes to various lenders and investors. It could be angel investors, your own family or friends, a P2P lending company, or a venture capital firm. Whatever step you decide to take, it might be a smart idea to lawyer up, so that you know well what you are getting into.