Business Funding: How to Get Investments For Your Business
It is very important to evaluate the cost of starting a business before you actually jump into the business. Once you evaluate the cost, you need to see if it is financially viable for you to start a business. If the investment required is more than you can manage, you need to find ways to build your business funds. You will have to see every possible method to build funds for your business. Evaluating the cost of starting a business involves a lot of things, for instance, you need to evaluate your manufacturing cost. Manufacturing cost itself involves a lot of things from buying raw materials to buying machinery and having people manufacture the products. You also need to evaluate the cost involved with setting up a warehouse and your corporate office. You need staff and your business cost should also include how much money you will be given as a salary to your staff. Without branding, running ads, and marketing, it is not possible to generate sales. This also should be included in you business cost.
If you want to start a business but do not have your own funds, there are a lot of ways to build funds for your business, for example, sell your assets, get loan, borrow from friends and family, invite partners, start crowdfunding, fund angel investors, etc. The discussion on which of these funding method is the best can go very long,
Family Funded Business
Family members can help you build business funds, manage and run a business, as well as generate and build sales. If you want to start a business but do not have funds, you can reach out to your family members and if they have spare money, they will surely lend you money. You might not even have to pay interest on that money. If you have loving and caring family members, they will also help you manage and operate your business and you might not even have to give them salary, even if you are paying them, they will accept low payment. Family members will even help you generate sales, they will buy your products and services and help you build initial sales. You can also use the expertise of your family members to start your company. Having a supportive family comes as a great advantage when you want to start a business.
Funding Your Business: Crowdfunding Vs. Peer-to-Peer Lending
If you don’t have money to invest in your business, there are numerous ways to raise business funds, crowdfunding and peer-to-peer lending are two popular methods.
The basic difference between Crowdfunding and peer-to-peer lending is same as the difference between donation and loan. While crowdfunding is raising money without promising any returns to the donors, Peer-to-Peer Lending is a loan that you get from individuals through a lending platform.
Donation means you don't have to pay back anything. If you want to raise funds through crowdfunding, you will have demonstrate that your cause is real and the funds will used wisely. Some crowdfunding platforms also require you to offer stake in your business or provide free products.
When you raise funds through, peer-to-peer, you must repay the principal amount as well as the interest on a loan.
Most crowdfunding platforms are available for global audience; you can launch your campaign from any countries (few countries might be exempted, though). However, Peer-to-Peer Lending sites are not available worldwide to raise funds. In other words, these platforms are available to the people in few countries like United States and Canada, or a few European countries. Interestingly, if you want to lend money and earn interest, you might be accepted to do so.
There are rules to be followed in order to borrow money from peer-to-peer lending sites.
How to Build Funds for Your New Business
If you are gearing up to launch a new business and need funds, here are some effective ways to build business funds
The best option is to pool money from your team. Instead of starting along, build a group who share your vision and chip in some cash to get things rolling. Many big companies we know today actually started this way.
The second best option is angel investors. These are investors who are on the lookout for fresh business idea and they are willing to take a chance on newbies if they believe in the idea and can get a share of the company. Angel investors usually fund the businesses and start ups that have already started operating. They invest with a belief that these businesses will become really big if they have enough money for product development and marketing. However, there are some downsides to having angel investors. For instance, they will ask for a share in the business in return for their money, they might have a huge equity share for their money. And they could also set conditions on how the business is run. Since they're the ones giving money and you're the one needing it, you might not have much choice but to agree to their terms.
Funding a Business Through a Loan
Requirements for Obtaining a Business Loan
Despite the fact that a lot of people do not like to get a loan to start a business and want to start with what ever they have, it is also true that your business cannot become successful if you lack finances. Therefore, sometimes getting a loan becomes necessary. To secure a business loan, you must have a functional business and convince the lender that additional funds will contribute to business growth. Submit a well-prepared business proposal and offer collateral, which should be valuable assets that reassure the lender of fund recovery. Also try to apply for the loan that offers flexible repayment plans.
Getting a loan for small business can be really difficult as banks do not trust small businesses. Even when a small business can find banks to lend them money, securing a loan can become difficult as collateral is necessary, which small businesses might lack. Consider savings and lending cooperatives or microfinance companies for small loans. These institutions operate on a smaller scale, offering small business and personal loans without requiring a lot of paper work and collateral. If you have an established business and collateral, obtaining a loan from banks can be relatively easy, but if you do not have collateral or have just started out or want to start small financial institutions can be good.
Conclusion: Business Funding
If you do not have money and want to start a business, you should start working for other companies and people. There are two benefits, one, you make money which you can use for your business, and two, you also gain knowledge and expertise to manage business. If you do not like this option, you can try selling your assets to build business funds, or borrow form friends and family. In case these options are also not available, try getting loans from banks for your business.