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How to Get Funds for Your Start-Up Business

New entrepreneurs often consider small business loans as the sole financial choice for a startup. To a large extent, this is correct but nevertheless, there are other reliable ways to get funded; such ways may even turn out to favor tour business better than the traditional small business loans.

The amount of money needed to start a business and attain steady growth in due time could be a confusing thing to estimate. There are times when you end up taking insufficient amounts, ultimately drag back to where you started, and there are other times you seek excess fund, which comes back to haul heavy charges and interests from your business.

That said, here are legit methods to fund your business and the special features they possess, pro or con:

Grant

In the interest of better economic development in the country, the Government (state and federal) offers to fund businesses that appear to have been properly planned.

Certain private institutions such as ‘idea Café’ also offers grants which of course despite it’s relatively lower value, (compared against loans) is fiercely competed for.

While this might have a demerit of offering inadequate amounts, and with almost unending paperwork, it’s a good way to keep you from overselling company shares to angel investors. NASE and SBIR are examples of grant funders in the United States.

Family and Friends

This is a domestic way to raise funds, which could, of course, result in some sore relationship later; it’s however still a good idea to raise startup funds with. Some new entrepreneurs prefer to skip this method for the reason described above.  It’s a relatively is a considerable reason but it still is the best method for an entrepreneur looking for small business loans without interests and arm-twisting charges. However, it’s difficult to raise a large amount of money this way, which means it’s useful essentially as a subordinate to a loan or other ready standing modes of financing.

Angel Investor

Angel investors practically buy your shares before your business starts running (equity buying). In which case, you’d lose a portion of business ownership. A good choice here, but if you carelessly follow this route you may end up selling out too much thereby totally losing business ownership. This concept is often confused with venture capitalism, but the difference lies in the ability of an angel investor to make his financial decisions solely by himself, while a venture capitalist is a member of a firm that has to wait on its team of advisors before deciding whether or not to fund your business.

High-value advice and experiences are other important benefits your angel investor can offer, as they often are long-term entrepreneurs themselves.

Microfinance

While this might be a valuable alternative for entrepreneurs with a poor personal credit score, it also serves as makeup funds for entrepreneurs that are already subject to a loan. Microfinance institutions don’t usually fund their patrons with large amounts but they serve as reliable alternatives to bank loans and lines of credit.

Personal Savings

While this may be regarded as a last resort in a race of business staring, it’s the easiest, no interest type of funding you can get. Majority of small businesses start operating with its founder’s personal funds. It may require credit loans and other forms of funding.

The usual way to go this is to harness wages from your day job, sell off a mortgage and other valuable things that can be forgone and get your businesses running.

Venture Capitalist

These are firms that take equity in exchange for funding. Quite similar to angel investors as described above, but they often require a higher level of convincing and more paperwork before they may agree to fund your business.

Another peculiarity to venture capitalists is that they are interested in getting returns instantly and moving into the next promising startup. Also, if your business niche goes a bit too far from tech, it becomes a little difficult to find a venture capitalist to fund it. The speedily funded startups are often within the tech niche or somehow related.

Conclusion

The target of every entrepreneur is to maximize profit while investing the least amounts possible into their businesses. However, the funding organization has a similar target, and they often are of higher experience in the field.

This means entrepreneurs can’t just seek a small business loan to start operations, there has to be some form of relevance, correlation, or special benefit your business can obtain from your chosen fundraising method. An example is that described above with the venture capitalist system and tech-oriented companies.

It’s a founder’s responsibility to find the best method as it scarcely goes beyond that which has been described above.

Thanks for reading.

Let’s know your thoughts in the comments section provided below.

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