If you’ve ever thought seriously about starting your own business then you should also have given some thought to the issue of how to find the funding that will help turn your ideas into reality.
These matters are, of course, key considerations in the context of starting up a new business of any kind. After all, without cash, even the best business ideas are destined to remain unfulfilled and forever on the drawing board.
There’s no denying that funding new businesses can be challenging but it is important to note that there are more ways than ever for start-up operators and entrepreneurs to access the financing they need at different stages of development.
Here’s a look at FOUR of the best:
Crowdfunding, otherwise called peer-to-peer lending, is a rapidly expanding means of matching up businesses and ideas with financers and investors. The process is enabled through online platforms and essentially allows companies to raise cash and borrow money on the basis of bespoke terms deemed to suit all parties on both ends of the deal.
2. Equity Investment
Standard loans aren’t always easy to come by so, by offering a stake in your business to savvy entrepreneurs, you can attain a much-needed cash injection from equity investors. Essentially, you would be exchanging equity or a share of your company’s ownership for money contributed by investors who do not receive repayment until they sell their shares at some future date. This isn’t a viable option for all businesses; for example, a grocery store is highly unlikely to generate the kind of revenue that warrants tradable stock, but for some startups – particularly those based on innovative concepts – there is a good chance an equity investor would be willing to pump money into the business in search of long-term gains.
3. Cash-Flow Loans
To say cash flows are critical to the prospects of newly created companies would be a considerable understatement. Virtually every new business will feel the squeeze at certain points in time and they’ll need to find money upfront while they wait for other payments to arrive. It’s a working capital conundrum that so often spells disaster for start-ups but these difficulties can be eased through cash flow loans, which are often industry-specific and can increasingly be arranged on short notice. Traditionally, small business and start-up loans can prove to be the most cost-effective source of funding but be aware that the approval process can be tricky as banks and credit unions have the highest credit standards among all funding sources.
4. Pension-Led Finance
As with each of the above options, pension-led financing is not suitable for entrepreneurs in every situation and it is important to consider each potential route to funding on its merits before taking the plunge. However, there are situations in which pension-led finance can be a great way to free up funds for new business ventures. The process essentially involves individual business owners using their own pension pots as an alternative source of funding.
Getting the Right Guidance
Anyone that is truly determined to see their entrepreneur ambitions fulfilled will be inclined not to take ‘no’ for answer when it comes to trying to find financial support for their ideas. This is laudable of course but what is most crucial in these situation is only to take calculated risks and only to pursue funding options after they have been carefully considered.
Key to it all will be getting the right sort of advice from the most appropriate sources beforehand and taking the time to gain a full understanding of the growing range of financial solutions available to start-up businesses.
About the Author:
John Baird is a personal finance and insolvency expert from Scotland Debt Solutions. He specializes in advising people on how to manage their money and deal with their personal debt problems.