5 Funding Options To Raise Capital For Your Small Business
Starting a business is no small feat. You need a solid plan and capital to stay in business long term. Capital will help actualize your business plan, which is often huge. This is because there’s so much to do during the initial stages. You’ll need to acquire machinery that’ll enable you to manufacture your products, hire workers, market your brand, etc. These resources might be challenging to acquire independently, which is why funding options are available. What funding options are available to help raise capital for your small business? Read on to get the answer to this question and more insight into the topic under discussion.
Merchant Cash Advance
The most common ways of acquiring loans involve many procedures, which can be frustrating as you look for your business capital. For instance, the financial institution must vet you thoroughly before availing you of the money you need. This process tends to take a long time, with most extending to several months. There’s a high probability you don’t want to wait for six more months to start a business. This is where merchant cash advance comes in.
Acquiring funding through merchant cash advance is a fast process. Merchant cash advance same day funding is possible, with most companies extending the approval process to a maximum of 48 hours. Also, these lenders won’t base their decision to avail funds on your credit history or past revenue. With such convenience, you can start your business as soon as possible and earn profits. Merchant cash advance, as the name suggests, isn’t a loan. Instead, you’re getting an advance on the money you’ll earn from future sales. Some of these lenders will request a fixed fee, with others needing a percentage of your daily transactions. This is how you’ll pay them.
Self-funding is an ideal way of raising capital for your small business. It’s also referred to as bootstrapping. As the name suggests, you’ll avail capital from your resources. It can be from your savings, assets, family, or friends. Although self-funding is ideal since you won’t have debts to pay after your business picks, it’s not viable if you need a large amount of capital. Even as you self-fund your business, you don’t want your personal funds to deplete and end up struggling financially. It’d help to supplement self-funding with another funding option.
Crowdfunding is where you source funding from several people. You’ll post your business plan on crowdfunding platforms, including the associated financial and growth projections. The general public will study these documents. If any of them find your plan achievable, they’ll invest a certain amount in your crowdfunding finance project to help you start the business. The amount of capital you’ll raise depends on the convincing power of your business plan and the public’s interest. The more people you appease, the more money you’ll get.
Repayment depends on the crowdfunding you adopt. You can seek reward-based crowdfunding, where the contributors require a reward for their investment. It can be in the form of products, services, discounts, etc. Alternatively, you can adopt donation-based crowdfunding, where those that make contributions don’t expect anything in return, including refunds.
Angel investors mainly focus on helping startups enter into business. Therefore, you’re highly likely to get funding for your business capital. However, these angels don’t blindly invest in any venture. They mainly invest in companies that show promise in success. Angel investors will vet your business plan and project potential growth, among other factors that’ll help them decide to invest. Therefore, ensure you have a solid, realistic plan. Also, present accurate potential sales and profit reports to them. Most angel investors won’t ask you to refund the money they lent you once you establish your business. They’ll require a percentage of ownership of your business.
Bank loans have been a common source of funds for businesses. Although the option has been there for a long time, it’s still a viable solution to your funding needs. Most banks will require you to have collateral against which they’ll secure the loan. Should you fail to pay your loan according to the agreed terms, the bank will take ownership of your collateral. Therefore, requesting a secured business loan amount you can afford to pay is advisable. It’s also good to point out that there are interest rates associated with the loan. These rates often depend on your credit score and history. If you have a bad credit history, expect to pay high-interest rates for your bank loan.
The discussion above shows the various funding options you can choose to raise capital. Consider doing research on each option before settling on any of them. Be sure to take note of the associated advantages and disadvantages. Once you have all the facts at your fingertips, proceed to make an informed decision that’ll help you scale the business world.