How Small Businesses And Startups Can Get Funding

Deciding where to get the funds for your startup can make or break verdict your entire business. With the myriad of financial institutions waiting for you to make your proposal, it’s always good to stop and think for a moment before getting a loan. Good businesspeople should not solely rely on a single source of financial aid. For financial security purposes and to keep your rising business from going bankrupt before it starts, here are a few financial sources you might want to consider for your startup’s capital.

Family and Associates

You may not have thought about it first but financial aid from friends and family is the best sources of funds. Plus, it does not require paperwork or hassle. You can even acquire the money in the shortest time possible, no more time spent on processing and waiting. If you’re lucky enough, they may not even want any interest at all. Remember that the first resources that you have to lean on are those who are close to you, but also take note that they may not offer much capital.

Angel Investors

These are individuals whom you can approach to fund the early stages of your business. They are usually wealthy business people. Some are retired executives of large firms who are more than willing to extend not only their financial assistance but also their network of contacts and expertise in the field. Angels finance less than $500,000 to startups. In return, you may need to give them a respectable position in the company, say one of the board of directors. These types of investors typically invest their own money on telecommunications, software, and medical technology, and in companies with potential income of about $50 million in the next three to seven years.

Bank Loans

Banks are a familiar stomping ground for all small and mid-scale entrepreneurs. Because they offer short and long-term financing, they can support your business from scratch with as little as 3 percent to 5 percent interest. Of course, this agreement may need a big sacrifice on your part, such as a personal guarantee, but if you are certain that you can repay the bank in time, you don’t need to worry about this.

Banks are also picky about who they give loans to. So before choosing any bank for your startup, be ready with your business plan, proof of personal assets, and any other documentation that can prove that you are an excellent investment.

Personal Investment

The best sources of funds for your small business are those from your own pocket, either from your savings account or from collateral on your assets. This generally represents your dedication to your business and your willingness to take risks for your startup. Other individuals and firms usually invest more in businesses where the actual owner has a share in the initial capital. This makes it appear to be more of a profitable long-term commitment.

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