One of the biggest challenges faced by any small business or startup is the challenge of acquiring enough capital. Some small businesses require very little capital to start while others with a lot of overhead will need tens of thousands of dollars before they can begin service or open their doors to the public. There are a variety of ways that businesses and startups can acquire this needed capital and many of the best methods can be overlooked by startups because of a lack of knowledge.
Personal Loan
A personal loan is one of the most common and easiest ways to get capital for your business. In order to get a personal loan, you’ll need to have decent credit and expect a personal loan to have a higher interest rate than a business loan. You will also receive less money from a personal loan and the repayment period will be shorter. On the other hand, a personal loan can be used for almost anything.
Business Loan
A business loan may be the best option for many people as it can provide you with funds specific to your business at a lower interest rate and with a better repayment plan than a personal loan. In order to get a business loan you may have to convince the lender of both your financial integrity and the plausibility and viability of your business plan.Â
Decentralized Finance
Decentralized finance is one new way of acquiring funds. Decentralized finance is based on cryptocurrency and the blockchain, and in most cases is completely removed from centralized finance, which is controlled by the government and banking institutions. Defy funds can be loaned through a process that is different from the one used to acquire funding through centralized Banks. The advantages and disadvantages of using defi loans must be understood before this method is chosen. One way to learn more about this method is by attending a distributed defi conference.
Private Funding
Private funding refers to getting a business loan from a private person or company that isn’t regularly engaged in lending. Many investors are willing to invest in startups and small companies. In some cases, private funding is supplied directly to the startup owner by their friends and family who want to support them and get it on their good idea. Other options for private funding include loans from companies that compile private investors’ money specifically for lending to small businesses.
Crowdfunding
Crowdfunding has become a more popular way to get funding since the popularity of websites that allow fundraisers to organize and collect money online. Crowdfunding is the process of gathering small donations or investments for many many people. For example, if you need $50,000 for your startup and you pitch your great idea to enough people, asking each to invest a small amount, you may earn the needed capital or part of the needed capital if enough people get on board.
Get Partners
One way to get capital for your business is to join hands with other people and create a partnership. Partnerships can be set up in many different ways and between different numbers of people. In some partnerships, multiple people with the same idea or skills pool their resources and talents in an equal partnership to begin a business. In other partnerships, one person has the skills or ideas to begin the business and the other partners are financial contributors only. These partnerships may be a bit harder to form and decide on terms but they can be a great way to involve passive investors in your business and gain capital.
Business Competitions
Some organizations offer competitions to startups in small businesses with the winners receiving a prize in the form of loans or grants for their startup. If you have a great business pitch, know what you’re doing, and know how to sell it, consider joining a business competition and pitching your business idea for the prize money.
Angel Investors
An angel investor is a person with capital who intentionally invests his money in startups or new businesses to support them. Many large businesses and corporations have started with the help of Angel investors. In order to benefit from this kind of capital you will have to have a great business pitch and be able to sell your idea to the investor in a convincing and competent way
Presales
Similar in the way they work to crowdfunding, pre-sales allow interested consumers to pay all or part of the price for the product before it has been produced. If you pitch your idea convincingly to enough people this can provide you with a great amount of capital. Your customers then pay any remaining amount and receive the product sooner than other consumers after it has been manufactured. Presales can be a great way to gain capital if your startup idea involves manufacturing a new product rather than offering a service, but you must be excellent at selling your idea and it must be a truly great idea in order to convince people to risk their money in your venture.
Conclusion
Every startup and small business needs to have a reliable way to gain capital. With the many options available to new businesses it’s important for owners to research the pros and cons and find the method or methods that best fit their specific business, service, and personality to achieve the best success in their startup.
