Startups are the heart of many economies around the globe that propel growth in today’s golden era for businesses. But despite this, many small businesses are still struggling to get access to the funding needed to expand their operations. Due to this lack of capital, many startups find themselves stuck in the same place and unable to compete with the big players in their industry.
If you’re also stuck in a similar situation, you shouldn’t lose hope just yet. Here’s a list of the best funding options where you can get the needed capital to expand your company’s operations:
- Bank Loans
Many small and medium-sized enterprises go to banks to get the required funds to fuel for greater business growth. The main reason for this is that banks don’t require entrepreneurs to relinquish a certain percentage of their future profits or company after clearing the loan. Banks loans are usually taken under the startup’s name, and the entrepreneur promises to pay it back by an agreed-upon date and a specific interest rate.
Before taking a bank loan, you should take your time to examine offers from different banks as each has specific advantages, be it personalized repayment or customized service. It’s best to also look at the bank’s commercial loans information to see whether it meets your unique needs or you should continue looking for another alternative. However, getting bank loans isn’t a walk in the park because your loan application takes time to process. In addition, there are strict requirements you must meet for your loan approval to go through.
- Angel Investors
If you’re willing to give up your company’s equity, usually at least 30%, then you should consider approaching an angel investor. One advantage of approaching an angel investor is they’re more understanding of the struggles you’re going through as a startup owner. This makes them an ideal choice because they won’t place too much pressure on you as a small business owner. Approaching angel investors is also less intimidating than other funding options, making them an appropriate pick. All you need to do is have realistic growth forecasts and objectives, as well as a convincing pitch.
Angel investors typically invest in your company while it’s at its early stages. But one downside of sourcing funding from them is they don’t invest a significant sum of money compared to venture capitalists.
- Self-Funding
It’s also referred to as bootstrapping, and it entails you funding your business rather than depending on outside capital for expansion. The money used will mostly be from your personal savings and is an excellent strategy to finance business growth if you’re extremely confident in your company’s growth potential. Bootstrapping is also ideal if you don’t want to give up equity to your business and don’t want the additional pressure from outside investors examining your every move.
This funding technique is a great option when you don’t want substantial money to pay for your business expansion.
- Venture Capital
This equity-based financing entails approaching a big investment group typically referred to as a venture capital firm. This type of financing isn’t meant for technologically-driven firms operating in sectors such as biotechnology, communication, and information technology. They also like taking on projects that promise greater potential even if the risk is higher with the hope to get a great return from their investment.
The distinct difference between venture capitalists and angel investors is they usually finance businesses that are already generating revenue rather than startups. They also want a greater percentage of your business and don’t expect to be involved in the day-to-day running of the business.
- Crowdfunding
This is another great financing alternative you should consider. It typically involves approaching a large pool of public investors through sites such as GoFundMe.com, RocketHbu.com, and Kicktstarter.com. Crowdfunding entails investors contributing a small sum of money to finance your business. In exchange for their contribution, you’ll offer them shares to your company, priority to using whatever item you’ve developed, ongoing incentives, and others.
Crowdfunding is an effective funding option many entrepreneurs have successfully used to get the finances needed to grow their businesses. But for it to be effective, you need to have a clear plan on how you intend to grow your business by having a greater competitive edge.
Takeaway
Expanding your business comes with additional costs such as financing for more inventory, higher payroll, insurance, and many other business expenses. However, many startup owners don’t know where to source the cash injection needed to foster business growth. Fortunately, this shouldn’t be a reason anymore after going over this comprehensive article on the best funding options that can help propel business growth.
