Knowing all of the sources to get the money you need to ensure that your business gets off on the right foot is critical. The beginning stages of any startup can determine if it will be a success or a failure.
Here are four options available at your disposal to fund any new business.
Self-Fund
When new entrepreneurs think about sources of funding their business, the last place they would expect to look is themselves. However, there are many benefits to self-funding, also known as bootstrapping. While may seek self-employed loans, which have their own unique benefits, taking money that you yourself save can be a valuable place to start.
The first, and perhaps greatest benefit of self-funding your business is the fact that you will not be in debt to another entity. In addition, if you have someone making an investment in your business, you will not have to constantly worry about satisfying potential investors.
By self-funding your startup venture, you not only will have no worries about being indebted to someone else, but you can also impress future investors. This will be done because they will see that you have “skin in the game”.
Family and Friends
Another option that may be available at your disposal is to get funding from your loved ones. If they are willing, your friends and families may be willing to help you and see you grow.
The investments that your friends and families make are typically either stock purchases or some type of loan. Future investors may also find this to be positive. Otherwise, if your families and friends are not willing to take a risk in investing in you, why should any other investor pour their money into your idea.
However, you should understand that many relationships with your loved ones could be fractured if there is conflict in how the money is going to be repaid. Having a clear, written agreement on how the money will be paid should alleviate any concerns. This could be the case even if it is an informal agreement.
If this isn’t a feasible option, having self-employed loans have proven to be a popular alternative.
Crowdfunding
A very popular method that has grown prominence in funding startups is crowdfunding. Before doing so, you should consult the various legal ramifications that come along with this method.
Traditionally, you can offer a product or another incentive in exchange for monetary contributions. These contributors do not receive any equity and there is no entitlement to be repaid.
Usually, the process is not regulated and a pre-sale of your product or serve is offered. It is not considered an official investment. However, you still need to educate yourself on what can legally happen to you if you do not obey the rules of this kind of funding.
Venture Capitalists
Venture capitalists are considered to be professional investors who invest in companies that are new. However, you should know that a typical venture capital investment is at least $1 million, and it can take a while before the deal is official.
You should ensure that you share similar interests with the venture capitalists you are negotiating with, because they may be seeking substantial control of the company in exchange for their investment
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