Whether you are looking to start up or expand a business, you will certainly need money, a working capital loan to pay for premises, new equipment, and marketing.
However, getting proper financing for your business can be a bit of a roller coaster, depending on the size of your business operations. The good news is that there are different sources of business funding that can help you get cash to start, run, or expand your business.
Six Business Funding Sources and Tips to Succeed With Them
1. Personal Loans
When planning to start a business, what usually comes to mind is taking a small business loan or a startup loan.
Unfortunately, many lenders may not be willing to offer business loans to startups because of a lack of customer base, inexperience, or inadequate management. The good thing is that you can opt to take a personal loan to fund your business, especially if you are employed.
However, most lenders will want proof of employment and may demand to see your current pay stub when applying for a personal loan against your salary. In other words, you will need a document from your employer showing your salary information and proof of income.
If you are looking for your current pay stub to help you apply for a personal loan, a simple online check stub maker tool can help you generate one easily, all by yourself. But make sure you have the pay stub signed by your employer before using it as a legal document.
2. Hire Purchase
Hire purchase is another form of finance that allows business owners to gain possession of a particular asset or assets and pay over an extended period at a price relatively higher than the cash price.
During the payment period, the business gets to own the assets on a leasehold basis and only attains full ownership of the assets once the final payment is made. A company must pay the asset finance provider a given amount of money as a deposit to access this form of funding. The deposit is usually at 10% of the value of the cash purchase.
3. Crowdfunding
Crowdfunding is among the newest ways of funding startups and has gained a lot of popularity in recent years.
In this type of business funding, an entrepreneur puts up a detailed description of their business on a crowdfunding platform. The information shared usually includes;
- Business goals,
- Projected profits,
- The amount of funding needed, and
- The reasons for needing financing.
When any investor on the crowdfunding platform feels interested in the idea, they contribute money to the concept in exchange for rewards such as equity or discounts on products depending on the amounts of their contributions.
4. Angel Equity
If you are willing to give up your business’s equity to raise funds, an angel investor can be a good option.
Angel investors are usually respected industry executives with surplus cash and are keen on investing in upcoming startups. Besides funding, angel investors offer mentorship and networking opportunities to help take your business to the next level.
To succeed with angel equity as a funding option, you must have a unique idea that the angel investors will be willing to put their money in, but that is doable. Many prominent companies such as Yahoo, Google, and Alibaba succeeded after receiving funds through angel investors.
5. Invoice Factoring
Invoice factoring is another popular method of business financing that many entrepreneurs might not have considered.
It involves selling outstanding invoices to a factoring company. The factoring company pays most of the invoiced amount immediately and then collects the money as it comes in on behalf of the business that sold the invoices. Because the factoring companies act like collection agents, they often buy the invoices at a discount.
Invoice factoring is only applicable for well-established businesses with a consistency of monthly receivables to leverage for quick cash.
6. Winning Contests
Another way of raising funds is through engaging in contests.
There is an increased number of sponsored contests where entrepreneurs can maximize their fundraising opportunities by showcasing their business idea against a competitor’s, with the winner walking away with funding for their business idea. On top of funding, winners also receive business mentorship, guidance, and exposure.
It is important to note that it takes a finished product or a great business idea to win these contests.
Putting It All Together
The list of six typical business funding sources discussed above is non-exhaustive; there are many other forms available.
Whether you go for crowdfunding, an angel investor, or a bank loan, each of these options has its specific positives and negatives. So, it won’t hurt to do a little bit of research to discover what is more suitable for your business.
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