Six Options for Financing Your Business

Beginning or restarting a business can take much time, effort, and resources. The demand for funds to complete business needs is often at the top of the entrepreneur or corporation’s to-do list. There are several opportunities available for entrepreneurs to get the financial help they need to follow through on their business goals. Here are six prospects for capital that firms should know in order to receive funds for making your business work. 

Equity Financing

The first way to increase funding is through equity. The opposite of debt, equity means that others purchase a stake in your company with their own cash and then later they receive a share of the revenue. By selling shares of ownership of the company to investors, through an initial public offering (IPO) for instance, you are able to raise capital without the intermediary or due diligence of a bank. Leverage investor relations tools to ensure you are able to communicate your IPO’s press release to a wide audience once established.

Debt Financing

Another possibility for financing is through debt from a lender. Before requesting financing, corporations and entrepreneurs should have an idea of an investment amount. This amount must be verifiable based on the business plan and the company’s objectives. If the bank, credit union, or other financial institution wishes to do business with you, you may have the chance to negotiate loan terms, including the interest rate and repayment schedule. Always bargain on your own behalf to give yourself the ideal time to return the financing and be able to make profits from the investment.

Venture Capitalism

An additional form of equity financing is venture capitalism. Venture capitalists are funders who provide specifically to startups and early-stage companies, typically, in exchange for a percent stake in the company. There are multiple platforms for discovering VC investors. You will want to check out the non-profit organization National Venture Capital Association to get an understanding of what is available. VC investors often receive their equity stake in the form of preferred stock or convertible debt but this depends on what stage your company is in currently. Because VC investors are taking a large risk by investing in you, they expect to have a significant portion of the business to themselves for a greater return on their investment.

Angel Investing

Angel investors are often wealthy benefactors looking to invest early in small businesses and startups in exchange for an equity share of the business. There are a few ways to get in touch with angel investors, including but not limited to:

  • Your personal network
  • Angel investor platforms like AngelList and SeedInvest
  • Regional or industry angel groups
  • Professionals like lawyers or investment bankers who may have connections to charitable contributors and philanthropists

Crowdfunding Platforms

The Internet has a vast community of crowdsourcing outlets that help users launch or design a new specialty or item that never existed before with the help of your target market. The profits from startups can be incredibly lucrative and are, thus, highly sought after. Crowdfunding helps large groups of people discover your business idea and see what you’re up to. From there, investors can make donations or they can earn rewards for contributions above a certain amount. Some crowdsourcing also allows the user to own shares of the eventually publicly-traded company.

Business Grants

The government and not-for-profit foundations are the first resources for accessing business grants. Often the federal government is looking to supply and fulfill funding gaps for research and development and environmental concerns. If your business is in this arena, you are likely a shoo-in for a grant, even at the state or municipal levels. The grant-writing process can be challengingly painstaking and many companies wind up hiring development associates or grant writers to help cover all the paperwork required to submit a grant application.

It is important for entrepreneurs and corporations to evaluate each available financing option. Then you must choose the one that best suits your goals or even a mix of a few opportunities could be critical to your business’s survival. Whether the financing is through equity or debt, there is no better way to make an influx of cash happen for your business than financing. Some of these grants even offer subsequent incubator or accelerator programs that provide mentorship in addition to funding and resources to assist startups and early-stage companies meet their goals.