So, you want to start your own business and need some funds. Acquiring those funds isn’t always that easy. Luckily there are a variety of sources available to make your business dream a reality.
But before you start looking for funds you need to have a clear picture of the amount of financing you’ll need. Not only today but to make sure you can build a sustainable business over time. Once your business and financial plan is defined, you can investigate which types of sources are appropriate to fund your business.
The easiest type of financing is personal savings. Even if you consider external funding for your business, you’ll need to do a personal investment. You can’t expect an external investor to believe in your business if you don’t believe in it yourself and are not willing to make a commitment.
If you don’t have any savings right now you might need to postpone your business for a while and create a savings plan. Create a goal of how much money you’ll need and in which timeframe you need to reach the target. Set a fixed amount of money aside each month and work towards that goal. With your future business in mind, you’ll find that it’s easy to save up some money.
Fools, friends and family
FFF, or fools, friends and family are often the next source of funding when personal savings are not sufficient. The people in your network trust you and will be eager to support your project. It’s an accessible source of funding but there’s also a catch. If you go out of business, you’ll still have a personal connection. Be clear on the risks involved and talk about what the scenario will be if your company will end up in trouble.
Pitch your business at startup competitions. Many of those competitions offer some financial reward for the best pitch. Most likely you won’t hit the jackpot on the first attempt, but while participating in those pitch competitions, you’ll perfect your sales pitch of which you’ll reap the benefits in the future. And over time you will get to the winner’s stage. Besides a source of funding pitching at events and conferences is an ideal way to get exposure for your project and drive sales.
Next in line are bank loans. To get access to bank financing you need to make sure you’re prepared. Have a detailed financial plan. You need to have a clear picture on how much money you need, over which period, and what your payback capacity will be. Most bank loans you pay back on a monthly basis. You need to make sure you generate sufficient profits to cover the monthly instalments.
If you have been running your business for a while, the bank will be interested in your historical records. Make sure you keep accurate accounting records from day one. It will help you to secure financing in the future. Use of online accounting software like Accounteer helps you to keep track of your financials on a daily basis.
There are plenty of incubation and acceleration programs for startup companies. Some of those programs also offer seed funding that can give your company the cash needed to bring business up to speed. When considering an incubation or acceleration program don’t only look at the amount of cash offered. The network and supporting services such programs can offer are much more valuable than the funds. It’s better to choose a program that matches the business you’re running and can help you scale.
When participating in a program that provides seed funding make no illusions. They will become a shareholder in your company and will also want to have a saying. Your need to be happy with the fact that another party will become part of the decision-making process.
If you need a large amount of money for a project where there is still some risk involved VC’s are the go to party. Venture Capital is for more established businesses that have defined a repeatable and scalable business model. It’s for businesses that are out of startup mode and are ready to scale. What is meant by a scalable and repeatable business model? It means that you have defined an acquisition channel to acquire more customers. You have perfected the sales funnel and know exactly how much money you need to invest in acquiring a new customer and how much profit that new client will bring. The only thing you need is funds to scale up your sales.