How to Find Funding: 5 Viable Sources of Capital for Your Startup
Picture: Alexander Grey / Unsplash
The hardest part about becoming a business owner isn’t necessarily developing a sound business idea or creating a business plan. Instead, many entrepreneurs and business owners discover that finding viable sources of capital is the biggest challenge.
There can be a great deal of fear associated with the unknown. Gaining trust and confidence in something yet to be established is undeniably tricky. Still, it can be possible. You might have success exploring these financial avenues:
Crowdfunding
While you might need to part ways with discounts, goodies, and business gifts through crowdfunding, it can be an excellent way to bring a great business idea over the line. Crowdfunding involves raising money for a project or venture through an online platform. Rather than approaching a few people, you can try to attract the interest of hundreds.
Crowdfunding also means not having to part ways with equity. Instead, pledgers can invest a small sum in exchange for perks like free products, discounts, and naming rights.
Angel Investors
For many soon-to-be business owners, angel investors are the very thing they’re named – angels. They are individuals, typically investors, who provide seed money, advice, and mentoring to help projects and ventures get off the ground.
In exchange for their time and money, angel investors receive ownership equity. How much this is can depend on their investment.
Angel investors can differ from more traditional investors in that they can act as a guiding light for entrepreneurs. They typically offer support and financial backing in a business’s early stages when other lenders are less willing.
Bank Loans
If you have a detailed business plan, there’s no harm in approaching your local bank to speak with a business lender. While there can be strict eligibility criteria and high-interest repayments, business loans are still an option worth exploring.
You don’t have to part ways with business equity and can budget around structured repayment plans. Sometimes, the stability and certainty of a bank loan make it an attractive option.
However, it’s important to know that only the minority have their funding requests approved. Just 31% of small business owners received the funding they requested in 2021. That figure was down from 51% in 2019. Those less likely to be approved were firms with fewer employees, in the leisure and hospitality industry, and businesses owned by people of color.
Government Grants and Subsidies
Governments want businesses to succeed just as much as their owners. That’s why many governments offer grants and subsidies. You might be eligible for various financial incentives depending on your industry and objectives.
The U.S. Small Business Administration provides limited grants for starting and expanding businesses. They also provide counseling and training programs for entrepreneurs. You might also enjoy financial incentives if you’re exploring export development or are engaged in scientific research and development.
Corporate Partnerships
Sometimes, startup business offerings can be so lucrative that even well-established businesses want to get involved. It’s not uncommon for new businesses to collaborate with established companies and form partnerships.
Such relationships can offer access to industry expertise, more credibility, and the funding you need for success. However, it’s worth being aware that negotiations can be complex. You might also lose some of your business freedoms and autonomy.
Finding viable sources of capital for a startup venture is rarely easy. However, your hard work can all be worth it! After exploring corporate partnerships, bank loans, angel investors, and other funding options, you might find the best solution to suit your unique needs.
