Along with time, hard work, and dedication, capital is one of the most important things for your business. No matter how much time you invest, how much hard work you do, if you don’t have the funds, your business will never reach the heights you dream of. In the absence of business capital, either they are unable to start or it goes under at some stage due to a lack of money.
Most startups fail during the first year of their operations and the main reason behind that is lack of funding. Money is the bloodline of a business and keeps it running. That’s why it becomes important for you to have a fund that you can delve into.
Here we present to you five ways in which you can fund your business.
1) Self Funding:
Here, an entrepreneur starts their business by using their own hard-earned money. The amount of this funding depends on the financial status of the entrepreneur. The duration of this phase depends on the maturity of the business and how long one can keep the funds going. If you are self-funding, then you will not have to give your company’s stake to any outsider.
2) Angel Investors:
An angel investor is a person who invests in a new or small business venture, providing capital for start-up or expansion for a higher rate of return than would be given by more traditional investments.
The money is given in the form of a loan which can later be converted into equity when the evaluation is fixed. This is a faster and cheaper means of financing than selling stocks as you do not need to set valuation.
3) Equity Funding:
In this, the entrepreneur has to share equity in the company in exchange for money from the investor. In the event the business fails or goes under, they don’t have to return the money as the investor is a partner in the company.
4) Business Loan:
An entrepreneur should ideally go to the bank first for funds. They provide two kinds of financing for businesses; one is a working capital loan, and the other is funding. No matter the kind of loan you take out, the debtor has to return the money to the bank with interest, whether the company runs or not.
5) Government Grants:
You should look up if the government is providing grants in the sector you want to start your business in.
Grants are given to promote development in some areas. If your business idea is a sector where there is a possibility for a grant, then you can apply for it. Although the amount of a grant is usually not much it can help you start the business at the basic level.