In this day and age, there really are so many ways for you to raise money for your small company. Picking the right one is what’s important. Each different type has different benefits and drawbacks and will be determined what kind of business you are and what your strategy is. Here are some examples.
Family or Friends
It’s very common for a business owner who is in the early stages of running a business to borrow money from their family and their friends. This option is most suited to businesses that know for a fact that they have a high chance of success, or for companies that have proof that they have a solid business model. The great thing about this is that it is much quicker to get the money and you also have a lot of flexible funding options too. This of course, does depend on how much interest you are going to pay your friends and your family. The cons of this include the fact that borrowing money from your family and friends could easily damage your relationship.
If you look into this option then you will be able to raise the funding you need, all online. This is usually done through the general public. People can either lend you the money, such as a P2P loan or they can take a stake in your company. With this option you will be able to get all of the money very quickly. This is most suited to those companies who have a very good level of growth potential or those who are going to be able to attract a lot of customers in a very short space of time.
In some cases, especially with creative or technological products, the customers are donating the funds. They have a keen interest in the product itself or the narrative surrounding it. Video games are prime examples of this.
The cons of this include the fact that it will take you a long time for you to hit your target and you may well have to invest a lot of money in your publicity as well. Also, crowdfunding is not a sustainable source of income: just because it happens now doesn’t mean it’ll have again.
Loans remain a very popular source of funding for a huge range of businesses. You have to make sure that you do your research into the types of loans that are out there so that you can understand the interest rates. Comparison tools – swedish Prekredit is one example – enable businesses to get a greater view of what’s available and what is appropriate for them.
Traditional banks are one way to get a loan. They offer the guarantee of money – they will have it and once they say yes then it will be yours. Also, you are not exchanging parts of your business for the loan, only as collateral. One downside is that if, say, you need less of the loan than you took out, they won’t adjust the loan. Another is that the process for acquiring a loan can be quite long.
Angel Investors are those who are very wealthy and they fund your business in exchange for them getting a share of your company. Some of the pros include the fact that Angel investors are able to give you a lot of experience and they can also give you some business advice and some guidance too, so make sure that you keep this in mind. The con is that you may have to give up the control you have over your business, to some extent.
Venture capitalists are people who will put a lot of money, more than an Angel Investor would, in exchange for a large part of your business. The idea is that they will help you to grow your business quickly so that they will see a big return for you. If you are a start-up and you have a lot of growth potential, then this could be an option for you. Venture capital funding is a good route if you want to secure the right funding along with mentoring. In addition to you getting experts to help you with your business, they can easily help you to open the doors to other contacts, so make sure that you keep this in mind. There are a number of conditions that you will need to meet as a company and your investor will have goals to meet as well. On top of his, you will need to carry out a qualifying trade.
You have to know that all of the above ways for you to make money will depend on the business you have and the risk you are willing to take. If you want some help with your investment, then you need to make sure that you consult a mentor. When you do, you will soon find that you are able to make the most out of every opportunity that comes your way.
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