Whether you are starting up a business venture or keeping your existing business running, a funding source is always necessary. While an existing business may rely on its revenues, thinking of strategic ways to fund a startup may prove to be more challenging.
Nevertheless, there are several ways that you can fund your business and listed below are some of them.
Bank loan
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Business loans from banks is the first thing that comes to mind in terms of searching for ways to fund your business. While it can be challenging for a startup business to get a bank loan, there are specific banks that offer business loans with terms and conditions that are proven to be manageable. Even prevailing businesses can benefit from a bank loan, especially during economic downturns.
Microloan
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Apart from a business bank loan, there is also the option of a microloan. The loans applied for from micro lenders are usually smaller than the funds applied for in bank loans. The documents needed to support the loan application are also likewise fewer. However, micro lenders tend to impose a higher interest rate compared to business bank loans.
Another way to fund your business is by taking out a cash advance from your credit card, with the amount usually dependent on your credit limit. A cash advance is considered as a loan you take out from your credit card. However, this method of securing a fund for your business poses a lot of risks. For one, falling short in paying before your due date can greatly impact your credit score, while paying just the minimum amount due each month can translate to extreme interest charges that you can never get out of. Nevertheless, with a responsible use of your credit card, you will be able to effectively handle emergency situations in terms of funding your business.
Market research
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Startups and existing businesses can both benefit from market research. While market research can prove to be an expense up front, it can narrow down how you can get through your target market through effective advertisements. With an effective advertisement and marketing strategy, you will be able to generate more revenue to fund your business. Market research can be performed through surveys. According to SurveyCool.com, there are even sites that offer paid surveys to encourage people to take some time to answer. Some paid survey sites even directly pay in cash instead of points. Nevertheless, these points can still be converted into cash or other reward items. This will encourage more people to participate, thereby generating a more reliable data for your market research. This data will help you produce an effective marketing strategy that focuses on your target market, raising up the chance of your business to generate more profit.
Factoring
Source: POS Overview
Factoring is the process of getting funding for your business by selling your receivables at a discounted price in exchange for immediate cash. Receivables are the debts owed to a business by its customers for the goods and services it has already delivered but are not yet fully paid. Factoring is more suitable for existing businesses because there is a great possibility that these enterprises already have ample account receivables.
Angel investor
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This method of funding a business is great for startups and small enterprises. An angel investor is someone who is willing to finance your business. It doesn’t come without any cost though, because angel investors tend to keep a certain percentage of your profit depending on your investment contract. However, if in the event that your business fails to succeed, the angel investor also takes all the losses. To attract an angel investor, add credibility to your management team by seeking the services of a highly experienced adviser. This will ease your potential investors’ doubts about the ability of your company to handle tough economic situations. More often than not, angel investors can also see between startups who are in it for the business because of profit, and those who are in it to pursue their passion. Thereby, it is important to define your business goals and continue to build on your expertise in the field. While angel investors may not be immediately interested in your business, it is a good idea to keep them updated, especially on your business wins.
Crowdfunding
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Thanks to the advancements in technology, there are more avenues for people to get together for a good cause. If you are putting up a social enterprise, crowdfunding is your best bet in financing your business. There are several crowdfunding sites that offer fun and unique ways to raise money, usually for a good cause. Thereby, if you are putting up a business to provide livelihood for indigenous people or to manufacture alternative products in exchange for the use of plastic materials, then crowdfunding can be the number one source or your funds. Crowdfunding will also be an avenue for you to collaborate with other like-minded individuals pursuing the same passion as you do. You can take the help to a professional crowdfunding agency like Growth Turbine to set up the marketing campaign effectively.
Make a Future Pledge
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Another way of funding your business is by pledging your future earnings. There are already online marketplaces nowadays where startups and small businesses are able to offer a certain portion of their future earnings in exchange for an immediate funding. More often than not, this type of funding is popular among young and ambitious entrepreneurs who have a bright vision on how to achieve their business goals. While there is a certain level of vagueness in terms of the legality of the personal investment contracts that two parties would have to agree to, the contract can be upheld as long as both the investor and the entrepreneur closely collaborate and clearly state the terms and conditions encompassed in the contract.
Looking for ways to fund your business is indeed a difficult task. Nevertheless, you can overcome this challenge with the tips above and the results can be rewarding. After all, a successful business is not one that is free from challenges and difficulties, but rather one that is able to overcome all these.
