Business Financing: Where to Get Money if I Have a Startup
- October 30, 2019
- By Admin: June McClendon
- Comments: 00
Most people who start a tech business usually have some prior experience in the tech sector, and also have some savings of their own. So if they are interested in starting their own business, they will usually invest some of their own savings since this is the easiest way to pay for expenses.
Most people will leave their job and start the business only if they are convinced that the business will do well in the future, and so they are usually willing to invest at least some of their own money in the business. They have total control of their savings and can spend as they wish without being questioned.
Help From Family and Friends
In some cases, the savings of the start-up business owner are not sufficient to pay for the initial investment and expenses, so the business owner may require funding from additional sources. Most business owners will approach their friends and relatives for money which they require for the business.
In some cases, the family and friends may not have enough money to pay, while in other cases, they may require a stake in the business. If they want a stake, the personal relationship will be converted into a business relationship, and it may affect the personal relationship with family members, friends if the business fails.
Cash Loans for Emergencies
Sometimes, the business may have some unexpected expenses and the business owner may not have sufficient funds. For example, expensive computer equipment can fail due to hardware error, malware, software of hacking. If the business cannot afford downtime, it will have to purchase replacement equipment at the earliest.
Most hardware sellers will only provide replacement equipment immediately if the buyer is paying cash. If the business owner does not have enough cash, he will require cash advance online the same day and will be interested in finding a lender offering quick cash loans.
While family and friends may help with cash loans, many business owners will approach angel investors or online sources for loans for their startup. The angel investors are usually wealthy individuals or executives who are interested in diversifying their investment and also getting better returns.
If they are convinced that the business model is right, and the business is likely to flourish in the future, they may be willing to invest in new business. The amount which an angel investor will invest is usually smaller. However, the advantage of getting funds from the angel investor is that he can provide the funds quickly, sometimes the same day.
Venture capitalists are another source of funds for many startup businesses. Most of the venture capital firms are larger, and they will usually invest in a business, only if they are convinced that they will make a profit. For investing they will require more information from the business owner, like the business plans, projected revenues, expenses, and business growth plans.
They can also help the business owner in other ways, by mentoring them and providing advice. The amount in which the venture capitalist can invest in a business will usually be more than other investors and they will require a stake in the business.
Bank Loans and Grants
Banks are the conventional source of financing for tech and other businesses. However, it is usually more difficult for a startup business with no revenues to get a loan from a bank. If the business has revenues for a few months or years, it can apply for a bank loan. However, the time to process the bank loan is usually more, and they may require more documents.
There are often incentives available for small businesses and startups in the form of lower interest rates. Some businesses can also avail of government grants in some sectors to fund their startup if they qualify.
There are many sources of funds for small business owners based on their requirement and they should choose the right source after considering the pros and cons.