Every great business cannot be birthed without adequate funding to start up and grow the business. Many business ideas have failed due to insufficient startup funding. Indeed, startup funding rounds have never been easy and in most cases, it can take longer than expected.
However, there are several startup funding options that you can access to kickstart or build a business empire. In this article, we review ten best start funding options for entrepreneurs.
10 Best Startup Funding Options for Entrepreneurs
Making money is the goal of establishing any business. However, without money, no business can be established. Lack of funding is the major reason why most new businesses fail. A recent study shows that over 94% of startups fail during the first year of operation due to inadequate funding. Now that you have a business plan, you would also need to access different funding options to source for capital before venturing into any business. So, how do you finance your startup?
Wanna learn how to get funding for startup? Below, you'll find the best ten funding for a small business startup that will help you raise capital for your business.
1. Bank loans
A bank is the go-to place for over 75% of entrepreneurs looking to fund their new business. In banks, you will be given two kinds of financing options including funding and working capital loan.
2. Venture capital
Venture capital is the way forward if you are looking to fund a startup without taking on debt. Venture capital is a form of private equity financing that is provided by VC firms to fund startups. A venture capitalist invests in a business venture by providing capital for emerging companies with high growth potential. VC capitalists will evaluate credentials such as your business plan, revenues, and team members to estimate the growth potential of the firm before releasing venture capital.
3. Look for angel investors
Angel investors are individuals or a group of networks with a keen interest to invest in new businesses. These investors have surplus cash and can offer professional mentoring on how to improve your business. If giant companies such as Google, Alibaba, and Yahoo can benefit from angel investors, you too can. The only downside is you won't get as much capital from angel investors as you would with venture capitalists. Also, be ready to give up 30% equity to angel investors as they prefer more risks in investment for higher returns.
4. Small business grants
Grants are regarded as "free money." It is one of the best startup funding options that require no repayment. Although they are hard to come by, seeking small business grants as startup business funding is worth it. So, take your time to research for small business startup grants to meet your business goals.
5. Raise funds by winning contests
Contests encourage entrepreneurs with great business ideas to establish their own businesses. This method of raising startup funds is gaining popularity today. During contests, you can pitch your idea through a business plan, present a product, or build a project. The project that stands out or comprehensively convinces the panel will be announced as the winner of the competition. Winning contests attract great rewards including media coverage and cash for startup.
6. Equipment financing
To start a business, equipment financing is one of the easiest startup funding options. If your niche requires you to purchase equipment, then equipment financing for startup businesses is ideal for you. This loan is given for the purchase of equipment which will act as collateral for the lender. As soon as you pay off the debt, the equipment automatically becomes yours. It is easier to qualify for an equipment loan and the business requirements are fairly lax.
7. Business lines of credit
A business line of credit offers a more flexible source of money for starting up a new business. This startup funding option is established by the lender to assist those with a bad credit score. The good part of a business line of credit is that you are given maximum credit where you can withdraw from for any business purpose. The downside is that you will only pay interest on the amount you have withdrawn at any given time. Offering startup money to new businesses is a risk that many lenders don't want to take. Thus, anyone who applies for a business line of credit will be required to have at least six months of business history under their sleeves.
8. Friends and family
If you don't qualify for venture capital, business credit cards, or small business grants, you might want to consider seeking startup funds from your friends and family. Sourcing startup business loans from friends and family is a traditional approach to borrowing money. You don't need any startup funding stages for this. Chances are you will succeed if you have a close relationship with your FnF.
9. Source startup funds from business incubators and accelerators
Business incubators and accelerators are worth giving a try especially during the early stages of your business. Who are business incubators and accelerators? Business incubators are individuals or a group of people who nurtures or assists the business to grow by providing basic tools and essential training for the business. Meanwhile, accelerators help to take a giant leap. Incubator and Accelerator programs usually run for 4-8 months and it is widely available in every major city.
10. Invoice financing
This is another funding option that you will be able to access in no time. All you need is to have at least one invoiced customer to access an advance for a portion of your company's outstanding invoice value. This form of startup funding is reliable however, many financing companies would require you to have established your business for a little time before being eligible for funding.
Pro Tip: Go for Low-Cost Startup Business Ideas
If you are overwhelmed by the financial pressure that you might encounter great difficulties in funding rounds and different funding stages, you'd better choose to build a business that requires low startup capitals but with great growth potentials, such as dropshipping, affiliate marketing, and so on.
Furthermore, you will find that dropshipping by partnering with one of the best free dropshipping suppliers like SaleYee.com is a great option.
Call to Action
With this guide, we are sure you now know how to get funding for your startup. Although many startups options may demand one or two credentials such as credit score, business history, and experience for eligibility. Yet, with our seed funding for startups options, you will find one that will best suit your niche.