Funding a startup is of many important but toughest jobs to do when you start a business. It should be looked as a sophisticated process where in you will looking at the advantages and disadvantages before you head for your choice among the multipe funding sources. You will also need to understand your financial assesment, know how to approcah, and most importantly application procedure.
Importance of funds
It is no tough deal to understand that when you are about to start a business, you will have to arranage diffirent necessary resources viz manpower, machinery, equipment, etc and all of it can’t come free. That is where you and other like minded people would need money to acquire your required resources for your business.
It should be noted that funds are required beyond startup phase. When you put together all the important requirement, you will need to grow it to reach more customers and earn revenue. All that is possible when you do promotion and implement production strategies to meet your growing market demand.
Here are the four best ways entrepreneurs can use to secure funds for their newly created startup business.
1. Personal savings
Personal savings are considered a best source of funds as it is risk free. That means you will take all the losses on yourself. You also don’t need to pay interest as it is own money. There is no one other than you who has any right to claims remains of your business and neither will any one claim profit. In short, whether you fail or succeed, all belongs to you.
2. Family and friends
You can also raise funds from your own family, friends, and relatives and you know that there won’t be a need for paying any type of interest to them as they are your own people who understand your pains. They will always stand by your side in your business endevour and will never ever want to show you back when you their emotional and financial support.
3. Bank loan
Bank loan is an option when you fail to obtain funds from your personal savings and family. You will be approaching your nearest bank to secure a loan. While you may get a loan as much as you want, you will need to keep a collatoral and pay back all the principal amount with interest to the bank.
The bank may ask you for collateral viz a house, a car, land and a few guarantors. It is important to take a calculated move when you approach a bank for finance.
4. Venture capital
Venture capital is another best method available to finance your business. You will be sacrificing or handing over a part of your business venture to a person who shows interest to invest in your business. You will be sharing losses and profits with your venture capitalists.